Government waters down inheritance tax plan for farms
On Tuesday, 23 December 2025, the government confirmed it will raise the 100% relief threshold for the "family farm tax" from £1 million to £2.5 million. The climbdown follows 14 months of sustained protests from the farming community and a growing rebellion within the Labour Party.3
Key Changes to Agricultural Property Relief (APR)
The new rules, scheduled to take effect in April 2026, have been adjusted to "protect more ordinary family farms" while still targeting the largest estates.4
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Higher Threshold: The threshold for 100% Agricultural Property Relief (APR) and Business Property Relief (BPR) will rise to £2.5 million per person.5
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Effective Rate: Assets above this £2.5 million threshold will be taxed at a 20% rate (achieved through a 50% relief on the standard 40% inheritance tax).6
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Spousal Transfer: Because the allowance is transferable, a married couple or civil partners will be able to pass on a combined £5 million in qualifying assets tax-free.7
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Combined Allowances: When combined with existing nil-rate bands, some farming couples could pass on up to £5.65 million without paying inheritance tax.8
Political and Sector Reaction
Environment Secretary Emma Reynolds, who took over the role in a September reshuffle, stated that the government had "listened closely" to feedback.9
"We are making changes today to protect more ordinary family farms. It's only right that larger estates contribute more, while we back the farms that are the backbone of rural communities."
| Organisation | Stance | Quote / Response |
| National Farmers Union (NFU) | Supportive | President Tom Bradshaw called it a "huge relief" that takes many farms "out of the eye of a storm." |
| CLA | Cautious | Noted it "limits the damage" but warned tight margins still make the tax "unaffordable" for some. |
| Conservative Party | Critical | Leader Kemi Badenoch described the U-turn as proof the original plan was "cruel and immoral." |
The Rebellion in Ranks
The policy shift follows significant internal pressure. Earlier this month, Labour MP Markus Campbell-Savours (Penrith and Solway) was suspended from the party after becoming the only Labour MP to vote against the government on the issue.10 He argued the tax would "devastate" his rural constituency.
While the government claims the reform will now only affect about 185 estates per year (down from the 375 originally forecast), rural campaigners insist that a full impact assessment is still needed, particularly for the distinct farming landscape in Wales.11
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