Government Reverses Inheritance Tax Policy on Farmland Following Pressure
The government announced a significant change to inheritance tax rules on farmland, raising the threshold from £1 million to £2.5 million. This announcement was made in a departmental press release two days before Christmas, during Emma Reynolds's tenure as environment secretary. The change is expected to ease the tax burden on many farmers.
Victoria Atkins, Conservative shadow environment secretary, criticized both the timing and the manner of the announcement, highlighting that it was not made by the chancellor and accusing the government of sneaking the policy out to avoid proper scrutiny. Treasury figures estimate that the higher threshold will reduce the annual tax revenue from £430 million to £300 million, with a £130 million shortfall described as a small fraction of the £22 billion fiscal headroom cited against fiscal rules.
The policy reversal follows months of pressure from farmers, campaigners, and some Labour MPs, with debates anticipated in Parliament the following month amid possible rebellions by Labour members. National Farmers Union president Tom Bradshaw welcomed the move, calling it a huge relief for many farmers. However, Victoria Atkins warned that some farms would still struggle to meet tax demands even after this U-turn and called for clarity on the details of its application.
Labour’s previous stance, as outlined by Rachel Reeves last year, proposed taxing inherited agricultural assets above £1 million at 20% and removing reliefs, an approach now reversed. Labour leader Keir Starmer acknowledged serious concerns about the mental health impact of the tax changes, noting that some farmers were considering suicide. This was highlighted in a government-commissioned report by Minette Batters. The change is part of wider ongoing debates about tax and public spending.
