The Treasury has rejected a proposal by the Department for Environment, Food and Rural Affairs (Defra) to soften upcoming changes to inheritance tax exemptions for farms, amid mounting concerns from the farming community.
Starting in April 2026, farms valued over £1 million will face a reduced inheritance tax rate of 20%, half the standard 40% rate. This policy will end the longstanding agricultural property relief (APR) which, since 1984, has exempted small family farms from inheritance tax, including land, farm buildings, and cottages. However, this change has sparked widespread backlash from farmers and agricultural organizations.
Defra had suggested that the policy be adjusted to exempt older farmers, possibly those over 80, to give them time to make use of current inheritance tax rules. However, the Treasury rejected the proposal, insisting that the policy would remain unchanged. A Treasury spokesperson defended the decision, saying the APR relief had disproportionately benefitted the wealthiest 7% of claimants and that the policy was essential to ensure fiscal sustainability amid a £22 billion budget deficit.
The National Farmers’ Union (NFU) has strongly condemned the change, calling it “disastrous” for the rural economy and warning that it would force farmers to sell land to pay the tax. The NFU fears that this change could undermine the future of family farms in Britain, with some farmers estimating that up to two-thirds of estates would be impacted. Defra figures suggest a smaller proportion of estates, around 28%, would be affected.
Despite the government’s stance, divisions remain within the ruling Conservative Party. Some ministers argue that the tax changes will only impact wealthier farmers, as a couple using all their inheritance tax allowances could still pass on up to £3 million in assets without incurring a tax bill. Any tax owed can be paid over a 10-year period. Others, however, fear the policy will strain relations with rural communities and raise relatively little revenue—around £560 million annually.
In response to the policy, a protest rally is scheduled in Whitehall next Tuesday, and further demonstrations are planned by the Farming Forum in central London. Tom Bradshaw, president of the NFU, emphasized that many farmers, particularly those working in family-owned businesses, are already financially stretched and may not survive such a tax burden.
In Parliament, opposition MPs, including Liberal Democrat environment spokesman Tim Farron, warned that the tax rise would be a “disaster for family farms.” The Conservative shadow environment minister, Robbie Moore, also accused the government of “arrogance” and called for a full impact assessment of the policy.
Despite the controversy, the government has maintained that the decision is final and has no plans to change the policy. A Defra spokesperson reiterated that the policy would go ahead as planned, in line with the government’s efforts to address fiscal challenges and ensure a balanced approach to public finances.
