Government alters death duty policy for agricultural businesses

Treasury intentions to levy a charge on inherited farming assets have been substantially altered, with the planned threshold increasing from £1m to £2.5m.

This policy shift comes after an extended period of demonstrations by farmers and disquiet from some governing party parliamentarians.

Original Plan

At last year's Budget, the government said they would start introducing a 20% tax on passed-on agricultural assets worth more than £1m from April 2026.

In her first fiscal event in 2024, Chancellor Rachel Reeves stated she would be ending the favourable treatment on farmland that had been in place since the 1980s.

The move would have seen passed-down agricultural assets worth over £1m subject to a levy at 20%, half the standard inheritance tax rate, yielding an estimated £520m each year by 2029.

Government Statement

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

"It's only right that wealthier landowners contribute more, while we stand by the family-run farms that are the backbone of Britain's countryside."

Sector Feedback

The President of the National Farmers' Union welcomed the adjustment, stating it "removes many family farms from the path of harmful policy."

The President of the Country Land and Business Association said: "The government deserves credit for recognising the flaws in the first proposal and changing course."

He continued, "However, this revision only mitigates the impact - it doesn't remove it completely. Many family businesses will own enough expensive machinery and land to be assessed above the limit, yet still operate on such narrow profit margins that this charge remains unaffordable."

Cross-Party Response

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

Some Labour MPs in rural areas have also voiced unease. At a recent legislative vote on the plan, a twelve backbenchers did not vote and one opposed the measure.

The opposition leader said on social media: "This fight isn't done. Other family businesses are still affected by Labour's levy, and we will keep campaigning until the tax is lifted from them too."

A opposition party MP stated: "It is totally unforgivable that family farmers have been put through over a year of uncertainty and distress since the government first announced these plans."

The Reform UK spokesperson stated: "This last-minute U-turn - whilst an improvement - does little to address the year of concern that farmers have faced... with British agriculture hanging by a thread, the government must go further and end this callous agricultural levy."

Updated Policy

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

But, it has now rowed back from the original proposal lifting the threshold level to £2.5m.

Alongside an exemption which allows farmers to pass on assets to their partners without incurring tax, this new government concession means a couple could pass on up to £5m in applicable assets.