Government Announces Partial Reversal of Inheritance Tax on Farms
The government has announced a partial reversal of the 20% inheritance tax on farms effective from next April, exempting about half of the farms that would have initially been affected. This U-turn follows sustained protests from the farming community and diplomatic efforts by the National Farmers' Union (NFU), with ongoing discussions shifting from seeking full abolition to focusing on mitigation measures.
The concessions were influenced by Labour's increased rural representation and pressure from MPs, with more than 30 Labour MPs abstaining on the vote as a sign of concern, while only one voted against the government. Notably, ministers had not been informed in advance of the announcement, although some dialogues this month were more positive.
Political pressure was also heightened by Keir Starmer's appearance before the liaison committee, where he faced cross-party questioning that highlighted the challenges faced by farmers. Downing Street plans to clarify the reasons behind the reversal and address the political implications when MPs return in January.
The reversal is expected to cost around £130 million, which is a small fraction of the UK's approximately £900 billion annual tax revenue. The government argues that the policy originally would have generated little revenue. This episode reflects a recurring pattern where Treasury-led revenue-raising policies encounter backlash and lead to partial reversals.
