Farming union hails 'victory for common sense' on inheritance tax U-turn

The UK Government announced on Tuesday that it will raise the inheritance tax relief threshold for farmers from £1 million to £2.5 million following months of protests.

The original Treasury plans to raise money as farmers pass their businesses from generation to generation triggered protests with tractors outside Parliament and criticism from some Labour MPs in rural seats.

Watering down the tax was welcomed by the National Farmers’ Union and rural Scottish Labour MPs, but the Tories and Lib Dems wanted the government to go further.

NFU Scotland President Andrew Connon said: “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 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, the Department for Environment, Food and Rural Affairs (Defra), said.

Above that allowance, farmers will get 50 per cent relief on qualifying assets and will pay a reduced effective rate of up to 20 per cent, rather than the standard 40 per cent.

Scottish Labour MPs in rural seats said they were “pleased” about the U-turn.

Stirling & Strathallan MP Chris Kane said: "I’m pleased that the Government has engaged with farmers and brought forward meaningful change to this policy.

“These changes will help protect genuine working farms, while also seeking to meet the original policy intention to discourage tax avoidance.

“I have been speaking with farmers in my constituency today about what this change will mean in practice.

“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.

“By increasing the Agricultural and Business Property Relief threshold from £1 million to £2.5 million from April 2026, and allowing spouses or civil partners to pass on up to £5 million in qualifying assets between them, the government has invested in the long term viability of the farming sector and in our food security as a country.

“Farmers are used to long hours and tight margins, and while this announcement alone will not solve every challenge they face, one said to me earlier that it helps him see light again at the end the tunnel."

Labour MP for Ayr, Carrick and Cumnock Elaine Stewart said: “After signing a joint letter to Emma Reynolds MP on 3 December pressing for changes to APR reform - I'm more than pleased that today’s changes to raise the threshold to £2.5m per spouse will benefit family farmers in Ayr, Carrick and Cumnock.”

Labour Scottish Secretary Douglas Alexander - who is also MP for the partly rural seat of Lothian East - said: "The UK Government is determined to work with Scottish farms that employ tens of thousands of people and contribute over £2billion to our economy.

“Changes announced today will mean that couples can pass up to £5m in agricultural and business assets between them before paying inheritance tax, on top of existing allowances.

"The UK government is backing our farmers through unlocking access to new markets with our trade deals, stepping up action on supply chain fairness, and setting up a new Farming & Food Partnership Board will put farming voices at heart of Government."

But opposition parties said the changes did not go far enough.

Scottish Conservative MP for Gordon and Buchan Harriet Cross said: “This is a welcome step from a Labour government that has neglected and undermined our farming industry at every turn.

“But it’s clear they 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, it 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 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.”

Scottish Liberal Democrat leader Alex Cole-Hamilton said: "It is utterly inexcusable that family farmers have been put through over a year of uncertainty and anguish since the Government first announced these changes.

"Liberal Democrats were the first to call out and oppose the unfair family farm tax in last years Budget and we have been proud to stand alongside our farming communities to campaign against it ever since. This concession has been hard won, and I am so grateful to all the farmers who have fought tirelessly to achieve this.

"This is about justice and security - if we undermine British farming then we also undermine our ability to provide us with the food we need to keep us secure in an uncertain world.

"Yet many family farms will still find themselves financially crippled and barely making the minimum wage.

"We demand that the government scraps this unfair tax in full and if they refuse to, Liberal Democrats will submit amendments in the new year to bring it down."