Getty Images
The Chancellor announced in October the end of the inheritance tax exemption for agricultural holdings.
A proposal from the Department of Rural Affairs to soften inheritance tax changes for farms – possibly by exempting some older farmers – has been rejected by the Treasury.
The Treasury said there would be no changes or mitigation to the policy, which will end the inheritance tax exemption for certain farms.
From April 2026, farms worth more than £1 million will face an effective inheritance tax rate of 20%, half the usual rate of 40%.
BBC Newsnight understands that the Department for Environment, Food and Rural Affairs (Defra), which represents farmers' interests in government, believes it was not properly consulted on the change.
The ministry was informed of the policy the day before it was announced in the budget.
The move has been branded “disastrous” by the National Farmers Union (NFU), with some farmers warning it would decimate the countryside.
Defra has suggested relaxing the policy to exempt some older people, possibly those over 80.
The policy's start in April 2026 means they may not have time to use existing rules to avoid inheritance tax by passing on wealth seven years before death.
But this suggestion was rejected by the Treasury, which said it had taken “a fair and balanced approach”.
Since its introduction in 1984, agricultural land assistance (APR) has allowed small family farms – including land used for crops or livestock, as well as agricultural buildings, chalets and houses – to be exempt from inheritance tax. .
The Treasury said 40% of the APR had gone to the “richest 7% of claimants” and that it had “made a difficult decision to ensure the relief was financially viable”.
He places this against a backdrop of “a collapse in public services (and) a £22 billion budget hole inherited from the previous government”.
“Around 500 claims each year will be affected and farming couples can pass on up to £3 million without paying inheritance tax – this is a fair and balanced approach,” a spokesperson added .
There are divisions within the government over change.
Some ministers believe it will only impact relatively wealthy farmers: a couple using all their inheritance tax benefits will be able to pass on a £3 million farm tax-free. Any inheritance tax on agricultural holdings can be paid over 10 years.
But other ministers say the chancellor risks damaging Labour's relationship with rural Britain while raising a relatively small amount of money.
The move could raise around £560 million.
Some sources within the government have expressed concerns that the chancellor is creating unnecessary grief over a change that is not, in relative terms, a huge revenue generator.
Some fear the change – which has proved controversial among farmers since it was announced – could become “totemic” in rural Britain.
Demonstrations
The NFU warned it would “take away the ability of the next generation to continue producing British food” and force farmers to sell their land to pay the tax.
A rally to protest against the plan will take place next Tuesday in Whitehall.
There is also dispute around the numbers used to calculate the changes.
Defra has informed farming leaders that the figures come from the Treasury and not their department.
Tom Bradshaw, president of the NFU, said Defra figures showed the changes would impact 66% of estates.
The Treasury said the figure was 28%.
Clive Bailey, founder of the Farming Forum which is also organizing a protest in central London next week, said on Thursday that any changes to the new rules “would be a step forward”.
Mr Bailey, who farms in Staffordshire, said the suggested exemption should cover people under 80.
Compared to the general population, in the agricultural sector “a lot of people who should have retired by now are still working”, he told BBC Radio 4's Today programme.
He called the succession rules “so poorly thought out.”
The cost of running a viable farm was more than £1 million, he said, saying the Government needed to sit down “with real family farmers or agricultural economists”.
“We are not special, but the economic situation of agriculture is very different from that of other sectors.”
“Politics will not change”
During questions on rural affairs in the House of Commons, Conservative shadow environment minister Robbie Moore accused the government of “arrogance” and urged ministers to publish a full assessment of the impact of the change .
Environment Minister Daniel Zeichner reiterated government figures that fewer than 500 farms would be affected per year.
He added that there were ways to “manage” change and called on Conservatives to “join me in reassuring British farmers about their future”.
Another Conservative MP, former minister Sir Jeremy Wright, asked whether ministers had considered limiting inheritance tax exemptions to those who could prove a farm had been in the family for “a number of years” .
Zeichner responded that the issue was “complicated,” adding “in the future we will have further discussions.”
Lib Dem environment spokesman Tim Farron said the tax rise would be a “disaster for family farms”.
“Rather than blocking Defra’s calls for a rethink, the Chancellor must urgently meet with the farming community and the NFU to better understand their heartfelt concerns and reverse the tax rise.”
A Defra spokesperson said: “With the collapse of public services and a £22 billion budget hole inherited from the previous government, we have taken the difficult decision to reform Agricultural Property Relief in a balanced way. and fair.
“All ministers support this policy and it will not change.”
