The Conservative government has raised the inheritance tax relief threshold for farmers from £1 million to £2.5 million, a significant change following months of protests and warnings. This announcement comes after farmers expressed concerns that they were contemplating suicide to avoid inheritance taxes when passing down their businesses.
A farmer whose father died by suicide the day before a previous budget welcomed the U-turn but criticized ministers for a "complete lack of understanding and compassion" towards rural communities. The new threshold, effective in April, will allow couples to pass on up to £5 million in qualifying agricultural or business assets tax-free, with a 50% relief on assets above this amount, reducing the effective tax rate to a maximum of 20% from the standard 40%.
The government estimates this change will reduce the number of estates affected by higher inheritance tax from approximately 2,000 to up to 1,100, primarily impacting the largest farms. While welcoming the change, some opposition figures criticized the timing of the announcement, stating it was made too close to Christmas when Parliament was in recess and unable to properly scrutinize the policy.
The decision to alter the inheritance tax plans also led to dissent within the Labour party, with one MP losing the party whip for voting against the initial proposals. The Environment Secretary stated the government had listened to farmers and made changes to protect family farms, emphasizing that larger estates should contribute more while supporting those that form the backbone of rural Britain.
The NFU president expressed relief, noting the announcement would significantly ease the tax burden for many family farms. However, some politicians argue that the tax should be scrapped entirely, as many family farms will still face financial difficulties.