Keir Starmer has caved after months of pressure from farmers with Labour today backtracking on plans to introduce inheritance tax for farmers.
The climbdown comes after crunch talks between National Farmers Union (NFU) president Tom Bradshaw and the prime minister last week, The Independent understands, following a year of protests about the measures.
Announced by chancellor Rachel Reeves last year, farmers were to be charged 20 per cent on agricultural assets above £1m from April 2026, triggering a storm of fury, with fears that family-run farms would be worst impacted.
But on Tuesday, Labour said it was changing the plan by raising the threshold from £1m to £2.5m, meaning most farms would not have to pay it.
The government said this would allow spouses or civil partners to pass on up to £5m in qualifying agricultural or business assets between them before paying inheritance tax, on top of existing allowances.
Gareth Wyn Jones, a farmer from North Wales who had been one of the leaders of the protests against the tax, told The Independent: “This is great news.”
Environment secretary Emma Reynolds said: “Farmers are at the heart of our food security and environmental stewardship, and I am determined to work with them to secure a profitable future for British farming.
“We have listened closely to farmers across the country and we are making changes today to protect more ordinary family farms.
“We are increasing the individual threshold from £1m to £2.5m, which means couples with estates of up to £5m will now pay no inheritance tax on their estates.
“It’s only right that larger estates contribute more, while we back the farms and trading businesses that are the backbone of Britain’s rural communities.”
But campaign group No Farmers, No Food warned that the climbdown was not enough.
They said: “Huge news for family farmers. The Labour government have finally U-turned on the inheritance tax on family farms. They have announced that the threshold is rising to £2.5m. It’s still not enough, but it’s still a huge victory for everyone who has relentlessly campaigned on this.”
NFU president Tom Bradshaw said: “After months of NFU campaigning, the government has today announced changes to the threshold for inheritance tax for family farms. These changes mark a huge victory for British farmers.”
Mo Metcalf-Fisher, director of external affairs for the Countryside Alliance, said: “This partial change to the disastrous family farm tax is welcome. It has caused months of unnecessary pain and suffering. It’s clear the government has realised that the growing perception that it is at war with the countryside is toxic.
“Whether the government will learn the fundamental lesson of this policy debacle, which is that it needs to work with the rural community – not legislate against it – remains to be seen. The government has a very long way to go to rebuild trust.”
The fury over the so-called Tractor Tax or Family Farm Tax had seen regular protests in London with tractors descending on Whitehall.
After Sir Keir had reached out to the farming community before the election, the change to inheritance tax was seen as a “breach of trust” with farming groups warning that even with the climbdown today, Labour will “find it hard to win back.”
The issue dominated responses to a recent review for the government of farming incomes and profitability by former NFU president Baroness Minette Batters, which was published last week after two delayed.
Even tax expert Dan Neidle, the architect of the proposal to start imposing inheritance tax on farms, had warned that the original £1m threshold was far too low and should have been closer to £20m.
This is just the latest major economic policy for Sir Keir’s government to U-turn on in the 19 months since winning the election. The attempt to get rid of winter fuel payments for 11 million pensioners was largely abandoned while the government stepped back from a bid to slash welfare by £5bn a year after a rebellion by Labour MPs.
Sir Keir also reversed his position on keeping the two-child benefit cap after pressure. And a planned hike in income tax was abandoned before it was implemented after chancellor Rachel Reeves had announced it was likely to happen.
Tory shadow environment secretary Victoria Atkins described the climbdown as “too little, too late”.
She posted on X: “At long last, Labour has snuck out a partial U-turn on their vindictive family farm tax. It is too late for some, however. Businesses and lives have been lost. Rural communities will not forget the distress, pain and panic this government has caused them.”
Lib Dem rural affairs spokesperson Tim Farron welcomed the news but added: “It is utterly inexcusable that family farmers have been put through over a year of uncertainty and anguish since the government first announced these changes.
“This is about justice and security – if we undermine British farming then we also undermine our ability to provide us with the food we need to keep us secure in an uncertain world.
“Yet many family farms will still find themselves financially crippled and barely making the minimum wage.”
Reform UK Deputy Leader Richard Tice said: “Labour’s tax raid on family farms has already been a disaster for the sector, plunging countless farmers into despair, with heartbreaking reports of some taking their own lives in order to save their farms for future generations.
“This cynical climbdown – whilst better than nothing – does little to address the year of anxiety that farmers have faced in planning to protect their livelihoods.”