UK backpedals on inheritance tax after farmer backlash

LONDON — The U.K. government has increased the threshold at which farmers and businesses pay inheritance tax following significant pushback.

The Agricultural and Business Property Reliefs threshold — where 100 percent rate relief is capped — will be increased to £2.5 million when it is introduced from next April, which is a large hike from the original £1 million level proposed by Chancellor Rachel Reeves in her 2024 autumn budget. Reeves’ original plan sparked intense backlash and protests from British farmers.

50 percent relief will apply to qualifying assets above that level, and spouses or civil partners will be able to pass on up to £5 million of agricultural and business assets tax-free, on top of existing nil‑rate bands, following the government U-turn. 

The government said on Tuesday that it changed tack after listening to concerns from the farming community and businesses about the reforms.

“We have listened closely to farmers across the country, and we are making changes today to protect more ordinary family farms,” said Environment Secretary Emma Reynolds. 

The government estimates only 185 farming estates will now fall into scope, down from 375, and 1,100 estates overall will pay more inheritance tax in 2026-27, down from an initial figure of 2,000.