The UK Government has announced a significant reversal on its controversial plans to reform inheritance tax relief for farmers, raising the threshold for Agricultural Property Relief (APR) and Business Property Relief (BPR) from the previously proposed £1 million to £2.5 million per individual estate. This policy shift, announced on Tuesday, 23rd December 2025, follows months of intense lobbying and nationwide protests by the farming community.
The initial proposals, unveiled in the Labour government’s Autumn Budget 2024, had aimed to cap 100% IHT relief on agricultural and business assets at £1 million, with a reduced 50% relief applying to values exceeding this figure. This move would have effectively introduced a 20% inheritance tax rate on the value of eligible assets above £1 million, sparking outrage among farmers who argued that it would force asset-rich, cash-poor businesses to sell off land to meet tax liabilities.
Farmers responded with a series of demonstrations, dubbed “The Great British Tractor Rebellion,” which included convoys of tractors protesting outside Parliament in November 2024. The sector argued that the reforms threatened the intergenerational transfer of family farms, which have largely benefited from 100% IHT exemption since 1992, a measure originally designed to protect food security.
Under the revised rules, which come into effect on 6th April 2026, estates valued up to £2.5 million will receive 100% APR and BPR. For assets exceeding this amount, a 50% relief will apply, meaning the excess will effectively be taxed at a 20% rate. Crucially, spouses or civil partners will be able to combine their allowances, enabling them to pass on up to £5 million in qualifying agricultural or business assets tax-free, in addition to existing nil-rate bands.
NFU Scotland President Andrew Connon hailed the government’s U-turn, stating:
“Today’s announcement is a significant day for the future of Scottish agriculture. The changes set out by the UK Government is a victory for common sense and reflects 14 months of relentless lobbying from NFU Scotland and the other UK Farming Unions in our pursuit to mitigate the worst of the impacts of the policy and protect our family farms.”
The Department for Environment, Food and Rural Affairs (Defra) confirmed the changes, highlighting that they will “significantly reduce the number of farms and business owners facing higher tax bills” and “halve the number of estates claiming Agricultural Property Relief… who are affected by the reforms” from 375 to 185 in the 2026-27 tax year. Environment Secretary Emma Reynolds remarked: “We have listened closely to farmers across the country and we are making changes today to protect more ordinary family farms.”
The farming sector has faced considerable financial pressures, including extreme weather, volatile markets, and rising input costs, leading many to question their long-term viability. Average arable land values across England and Wales have been approximately £9,811 to £10,500 per acre in 2025, underscoring the substantial asset values held by many farms. These IHT changes were seen as a critical factor influencing investment decisions and farm succession.
While the National Farmers’ Union welcomed the increased threshold, opposition parties argued it did not go far enough. Scottish Conservative MP Harriet Cross commented:
“This is a welcome step from a Labour government that has neglected and undermined our farming industry at every turn.
“But it’s clear Keir Starmer and Rachel Reeves are making these reckless tax raids up as they go along by continuing to play political games with the lives of farmers.
“While this will provide Christmas relief for some, this climbdown still falls short of the full reversal that I and the industry have been calling for.
“It shouldn’t have taken this long for a change to have been made to these damaging plans, but this government has no remorse for the distress it is inflicting on the sector.
“The consequences of these tax hikes have been devastating, impacting investment, future planning and the mental health of those across the industry.
“The work to scrap these proposals in full doesn’t stop here, which is why I and the industry will not give up in our fight to safeguard the future of family farms, and to protect our food security.”
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Despite these criticisms, Labour MPs in rural constituencies expressed satisfaction. Stirling & Strathallan MP Chris Kane noted:
“What they are telling me is that it helps the sums start to add up and gives them the confidence to look at investing in the future of their farms.”
He added that the changes “will help protect genuine working farms, while also seeking to meet the original policy intention to discourage tax avoidance.”
