The Government has issued a response to a petition signed by more than 130,000 calling for it to retain inheritance tax (IHT) relief for working farms.
Chancellor Rachel Reeves set out in the Autumn Budget that inheritance tax on some agricultural and business property will increase, with the tax relief to be restricted to the first £1million worth of an estate, while the rest will get a 50 per cent relief and so will be taxed at 20 per cent.
A petition on the Parliament website called for this decision to be reversed for working farms, warning that “changes to inheritance tax will harm UK farming deeply, with some farmers predicting their families will be forced out within two generations”.
The petition has been signed by over 135,000 people at the time of writing. In its response, the Government said: “It is not fair to maintain such a significant relief for a very small number of claimants, when this money could better be used to fund our public services.”
The response pointed out that over the past four years, 47 percent of the relief on agricultural relief claims when to the top seven percent of claims.
Ministers said the changes to the tax will result in up to 520 estates paying more in 2026 to 2027, with the changes to come in from April 2026.
The response also pointed to the current IHT tax breaks that will still apply for farmers: “Full exemptions for transfers between spouses and civil partners continue to apply.
“This means that any agricultural and business assets left to a spouse or civil partner will be tax free. Any transfers to individuals more than seven years before death as gifts will continue to fall fully outside the scope of inheritance tax.
“Any tax related to these assets can be paid in instalments over 10 years interest free and it means landowners will not necessarily need to sell land or other assets.”
The Government also urged that the changes should be seen in the “broader context” of current support for the farming industry.
Agricultural land and buildings is exempt from business rates while farming vehicles and machinery can use rebated diesel and biofuels.
Farmers are also exempt from the plastic packaging tax “for the plastic film used by farmers to produce silage bales” and taxes on profits can be levied on the average for two to five years, allowing “flexibility into their tax arrangements for difficult years”.
Ministers also claimed that farms will benefit from £5billion earmarked in the Autumn Budget to support farming and land management in England.
The Government explained: “This includes the largest ever Budget directed at sustainable food production and nature’s recovery in our country’s history.
“Despite the difficult fiscal inheritance, £60million of funding has also been prioritised for the Farm Recovery Fund to support farmers with the impact of severe wet weather over the last year.”
You can read the Government response in full here.
