Prime Minister Affirms Most Farmers Will Avoid New Inheritance Tax

The prime minister informed Members of Parliament that the “vast majority” of farmers would remain unaffected by the inheritance tax (IHT) modifications revealed in the recent Budget. Starting in April 2026, agricultural assets inherited with a value exceeding £1 million, which were previously exempt, will become subject to a 20% tax, representing half the standard rate. The National Farmers’ Union (NFU) characterized these changes as “disastrous” for family farms, asserting that they would “snatch away the next generation’s ability to carry on producing British food” and compel farmers to liquidate land to cover the tax liability. During her initial appearance at Prime Minister’s Questions as the leader of the opposition, Kemi Badenoch labeled the measure a “cruel family farms tax” and pledged its reversal. She urged Sir Keir to “reassure the farming community”. Sir Keir stated that the previous week’s Budget allocated £5 billion to agriculture over the forthcoming two years. He emphasized, “That’s the single biggest increase,” drawing a comparison to £300 million he claimed was underspent by the preceding Tory administration. He further asserted, “When it comes to inheritance, the vast, vast majority of farmers will be unaffected, as she well knows; as they [the Conservatives] well know.” The prime minister contended that Labour was “taking the country forward” through investment, whereas the Tories remained “stuck in the past”. Subsequently, during PMQs, Conservative MP Sir Edward Leigh, the longest-serving member of the Commons, implored Sir Keir, “as a good lawyer”, to “listen to the evidence” should it indicate that smaller family farms, approximately 250 acres in size, would be significantly impacted by the tax. Sir Edward inquired, “In a spirit of compromise, will he listen to the evidence, keep an open mind and perhaps be prepared to raise the thresholds to preserve our family farms?” The prime minister responded by affirming that the government was engaging with farmers, with ministers scheduled to meet the NFU on Monday, and was adopting a “fair and balanced approach”. He reiterated that the “vast majority” of farms would not be affected. Highlighting the additional expenditure detailed in the Budget, he further mentioned his upbringing in a rural community, stating his awareness that residents in such areas also required “an NHS that is back on its feet… schools that their children can go to and homes that their families can afford to live in”. Agricultural property relief (APR), established in 1984, has historically provided an exemption from inheritance tax for small family farms, encompassing land utilized for cultivation or animal husbandry, alongside farm structures, cottages, and residences. Following the Budget announcement, farmers have cautioned that the removal of this IHT exemption could lead to the closure of numerous family farms and severely impact rural areas. The government, conversely, has affirmed its dedication to assisting farmers and recognizing “the vital role they play to feed our nation”. Chancellor Rachel Reeves indicated that, in certain situations, the APR threshold might effectively reach approximately £3 million when other IHT allowances are also applicable. Paul Johnson, director of the independent think tank The Institute for Fiscal Studies, commented that the adjustments “will affect a remarkably small number of some of the most valuable farms”. He added that “[Farms are] still more generously treated, actually, than farms used to be in decades past.” The Treasury projects that approximately 500 estates annually, encompassing agricultural land, will be impacted by the APR revisions. On Wednesday, around 50 farmers demonstrated against these measures outside the Northern Farming Conference in Hexham, Northumberland, an event where rural affairs minister Daniel Zeichner delivered an address.