UK Government raises inheritance tax threshold for farmers after protests

The UK Government will raise the inheritance tax relief threshold for farmers from £1 million to £2.5 million in a climbdown following months of protest.

The change to the reforms initially unveiled at Labour’s first Budget last year comes after ministers “listened to concerns” of the farming community and businesses, according to the Department for Environment, Food and Rural Affairs (Defra).

Baroness Minette Batters, the former head of the National Farmers’ Union (NFU) who led an independent review for the Government, warned that the proposals had led to farmers contemplating suicide to avoid the tax changes.

Scottish farmers hold a tractor protest, over planned changes to inheritance tax along the Edinburgh city bypass earlier this year. Getty Images

The higher threshold, which will take effect in April, will allow spouses or civil partners to pass on up to £5 million in qualifying agricultural or business assets between them before paying inheritance tax – on top of existing allowances, Defra said.

Environment secretary Emma Reynolds said: ”Farmers are at the heart of our food security and environmental stewardship, and I am determined to work with them to secure a profitable future for British farming.

“We have listened closely to farmers across the country and we are making changes today to protect more ordinary family farms.

“We are increasing the individual threshold from £1 million to £2.5 million which means couples with estates of up to £5 million will now pay no inheritance tax on their estates.

“It’s only right that larger estates contribute more, while we back the farms and trading businesses that are the backbone of Britain’s rural communities.”

NFU president Tom Bradshaw said the announcement would be a “huge relief to many” and would “greatly” reduce the tax burden for many family farms.

He said: “Changes to Agriculture Property Relief (APR) and Business Property Relief (BPR) announced in last year’s budget came as a huge shock to the farming community. Until that moment, the best tax planning advice was to hold on to your farm until death and pass it on to the next generation who could continue to run a viable farming, food producing business.

“The original changes to APR and BPR, contained within the Finance Bill, resulted in a pernicious and cruel tax, trapping the most elderly and vulnerable people and their families in the eye of the storm. The NFU and its members have stood strong for what we believed in.

“I am thankful common sense has prevailed and government has listened.”

The Liberal Democrats called for the Government to scrap the “unfair tax in full” as “many family farms will still find themselves financially crippled and barely making the minimum wage”.