The administration adjusts death duty scheme for agricultural businesses

Government intentions to impose a duty on passed-down agricultural land have been substantially altered, with the proposed exemption limit increasing from £1m to £2.5m.

This policy shift is a response to months of campaigns by the farming community and unease from some Labour MPs.

Original Plan

At last year's financial statement, ministers stated they would start imposing a inheritance charge on inherited farmland and machinery worth more than £1m from the 2026 tax year.

In her first Budget in 2024, Finance Minister Rachel Reeves announced she would be scrapping the tax relief on agricultural assets that had been in place since the 1980s.

The measure would have seen passed-down farmland worth over £1m taxed at 20%, 50% of the standard inheritance tax rate, generating an projected £520m per year by 2029.

Ministerial Comments

"We have listened closely to family farms across the country and we are adjusting our policy today to protect more ordinary family farms."

"It's only right that larger estates shoulder more of the burden, while we back the farms and trading businesses that are the backbone of Britain's countryside."

Farming Response

The Head of the National Farmers' Union applauded the revision, commenting it "removes many family farms from the eye of harmful storm."

The Head of the Country Land and Business Association said: "The government is to be praised for recognising the shortcomings in the original policy and revising its stance."

He added, "That said, this revision only reduces the harm - it doesn't remove it completely. Many family businesses will own enough costly assets and land to be valued above the limit, yet still operate on such small returns that this levy remains prohibitive."

Cross-Party Response

In the 14 months since the initial proposal, there have been regular rallies by farmers close to Parliament.

Some governing party politicians in the countryside have also expressed concern. At a recent legislative vote on the plan, a dozen backbenchers did not vote and one voted against.

The opposition leader commented on social media: "This campaign isn't over. Other family businesses are still affected by Labour's tax raid, and we will keep campaigning until the tax is removed from them too."

A Liberal Democrat spokesperson said: "It is completely unacceptable that family farmers have been put through over a year of anxiety and anguish since the government first announced these changes."

The political party deputy leader remarked: "This last-minute concession - whilst an improvement - does little to address the year of anxiety that farmers have faced... with British agriculture hanging by a thread, the government must go further and abolish this callous agricultural levy."

Revised Details

The government had maintained that the change would safeguard smaller farms while stopping the very rich from buying farmland as a tax loophole.

But, it has now rowed back from the initial plan increasing the threshold level to £2.5m.

Combined with an allowance which allows farmers to pass on assets to their husbands or wives tax-free, this new government concession means a partnership could pass on up to £5m in applicable assets.