Vithanage Erandi Kawshalya Madhushani Jade Times Staff
V.E.K. Madhushani is a Jadetimes news reporter covering Political.
Government Defends Inheritance Tax Hike on Farms Despite Opposition
The UK Treasury has dismissed a proposal from the Department for Environment, Food and Rural Affairs (Defra) to introduce exemptions for older farmers under new inheritance tax rules set to impact family farms. Starting in April 2026, farms valued above £1 million will no longer be fully exempt from inheritance tax and will face a reduced rate of 20%, half the standard inheritance tax rate of 40%.
The proposal, aimed at protecting generational family farming, was rejected by the Treasury, which maintains that the reform is a “fair and balanced” approach. Defra, which represents farmers’ interests, was reportedly informed of the policy changes only a day before the Budget announcement, sparking frustration within the farming community and among rural advocates.
Historic Inheritance Tax Exemption for Farms Ends
Since the 1980s, the Agricultural Property Relief (APR) policy has shielded family farms, including land, buildings, and residential properties used in farming, from inheritance tax. However, the Treasury argues that 40% of APR benefits have historically gone to the wealthiest 7% of recipients. The Treasury’s spokesperson cited the country’s financial pressures, including a £22 billion budget deficit, as a rationale for the reform.
Under the revised policy, farm-owning couples will still be able to pass on up to £3 million tax-free. The Treasury estimates that approximately 500 estates will be affected annually, projecting an additional £560 million in revenue.
Defra, NFU, and Farmers Voice Concerns
Defra proposed a plan to mitigate the impact by exempting farmers over the age of 80 from the new tax, noting that older farmers may not have time to prepare under existing rules, which require a seven-year advance on asset transfer to avoid inheritance tax. However, the Treasury has rejected these suggestions, stating that it has made a “difficult but necessary” fiscal decision.
The National Farmers' Union (NFU) warned that the policy could result in forced land sales as farmers struggle to cover inheritance tax obligations. “This change threatens to strip future generations of their ability to carry on British farming,” said NFU President Tom Bradshaw, adding that farming costs frequently exceed £1 million, even for small operations. The NFU and farming community have organized protests, set to take place in Whitehall, as opposition to the policy grows.
Discrepancies in Impact Assessment Figures
Defra and the Treasury are at odds over the figures related to the reform’s impact. While Treasury figures suggest the reform will affect around 28% of farming estates, Defra and the NFU argue that up to 66% of estates may be impacted. Clive Bailey, founder of the Farming Forum and a Staffordshire farmer, criticized the government’s approach as “poorly thought out” and called for exemptions for younger farmers still active in the industry.
Political Pushback and Calls for Reconsideration
In a parliamentary session, Conservative shadow environment minister Robbie Moore accused the government of failing to consider the unique needs of rural communities. He urged ministers to publish a comprehensive impact assessment, highlighting the importance of preserving family farms.
Environment Minister Daniel Zeichner defended the policy, insisting that fewer than 500 farms would be affected annually and suggesting that the financial impact could be managed. Some ministers, however, have cautioned that the policy risks damaging the government’s relationship with rural communities, particularly given the potential for land sales among smaller farms.
Former cabinet minister Sir Jeremy Wright suggested limiting the tax increase to farms held by the same family for a certain period. While Zeichner acknowledged this as a potential option, he indicated that further discussions would be required to address the complexity of the issue.
Liberal Democrat environment spokesperson Tim Farron also voiced his concerns, describing the tax increase as a “disaster for family farms.” He called on the Treasury to engage directly with farmers to understand their concerns and find a more suitable solution.
Government Stance Remains Firm
Despite mounting opposition from the farming community and political figures, the Treasury has reiterated its stance. “This reform is a necessary response to fiscal pressures,” a Defra spokesperson commented, adding that the new inheritance tax rules are part of the government’s balanced approach to maintaining the UK’s financial stability. The spokesperson affirmed that all ministers support the policy, and no changes will be made.
Farmers and advocates now hope that continued protests and discussions may eventually prompt the government to reconsider the implications for rural Britain’s agricultural heritage.
