Ministerial plans to tax inherited farmland have been watered down, with the proposed threshold increasing from £1m to £2.5m.
This rethink is a response to months of protests by the farming community and disquiet from some governing party MPs.
Initial Announcement
At last year's financial statement, ministers announced they would start applying a 20% tax on passed-on farming businesses worth more than £1m from the 2026 tax year.
In her maiden fiscal event in 2024, Finance Minister Rachel Reeves stated she would be scrapping the favourable treatment on agricultural assets that had been in place since the 1980s.
The policy would have seen passed-down farmland worth over £1m taxed at 20%, 50% of the standard inheritance tax rate, yielding an estimated £520m per year by 2029.
Ministerial Comments
"We have paid close attention to farmers across the country and we are making changes today to safeguard more typical family farms."
"It's only just that larger estates pay a greater share, while we back the family-run farms that are the lifeblood of Britain's rural communities."
Sector Feedback
The Leader of the National Farmers' Union applauded the change, saying it "takes out many family farms from the threat of damaging tax."
The Head of the Country Land and Business Association said: "The government should be commended for identifying the problems in the original policy and revising its stance."
He went on to say, "However, this revision only limits the damage - it doesn't eliminate it entirely. Many family businesses will own enough high-value equipment and land to be valued above the threshold, yet still operate on such small profit margins that this charge remains unaffordable."
Parliamentary Reaction
In the year-plus since the first announcement, there have been regular rallies by farmers near Parliament.
Some governing party politicians in rural areas have also voiced unease. At a recent division in the Commons on the plan, a several backbenchers withheld their support and one rebelled.
The opposition leader posted on a social platform: "This fight isn't over. Other family businesses are still affected by Labour's tax grab, and we will keep pushing until the tax is lifted from them too."
A Liberal Democrat spokesperson argued: "It is totally unforgivable that family farmers have been put through over a year of uncertainty and distress since the government first floated these plans."
The political party spokesperson stated: "This last-minute climbdown - whilst a step forward - does little to address the year of anxiety that farmers have faced... with British agriculture in a precarious state, the government must go further and scrap this damaging agricultural levy."
New Terms
The government had maintained that the change would safeguard smaller farms while stopping large estates from buying farmland as a way to reduce tax.
However, it has now stepped back from the initial plan lifting the exemption limit to £2.5m.
Coupled with an exemption which allows farmers to pass on assets to their husbands or wives free of inheritance tax, this new revised threshold means a couple could pass on up to £5m in eligible assets.
