Chancellor’s tweaking of new tax rules gains short shrift from farmers
The NFU has insisted that the change announced to inheritance tax (IHT) for farm businesses is “nowhere near enough to protect many family farms” and does nothing to remove the “cruel impact of the policy on elderly and vulnerable farmers.”
In her Budget announcement this week, Chancellor Rachel Reeves declared that the £1 million threshold in the new IHT rules will now be transferable between spouses. This means that if a married farmer dies, they don’t have to leave £1mn of agricultural assets to their children.
They can instead leave it to their spouse, and the spouse will be able to use their deceased’s £1mn, in addition to their own £1mn to hand to their children tax-free on their death.
Farmers widowed any time prior to April 2026 will be able to use their deceased spouse’s allowance.
“This makes the inheritance tax rules for those with agricultural and business assets less complex and fairer,” the government said.
However, NFU president Tom Bradshaw argued that the changes represent a drop in the ocean. “It’s good to see the government accepts its original proposals were flawed,” he said. “But this change goes nowhere near far enough to remove the devastating impact of the policy on farming communities.
“It’s only right that agricultural allowances can be transferred between spouses and it’s something we’ve been calling for, but it doesn’t go anywhere near far enough in protecting the working people of the countryside. It does nothing to alleviate the burden it puts on the elderly and vulnerable.
“It is also a huge smack in the face to the Labour MPs who have been working so hard to find a way through this for their local farmers. To them, we say thank you.
“The Chancellor said she wanted to ‘back working people not make them poorer’ and to ‘increase investment not cut it’. To do that, government must look again at the multiple solutions that have been put forward by industry and tax experts.”
A similar view was put forward by Gavin Lane, president of the Country Land and Business Association. “This concession is the first public signal that the Chancellor knows her inheritance tax reforms have been a disaster,” he said. “Across the country, family businesses have been reducing their investment, at an enormous cost to the economy and the British public. It is not too late for her to scrap the entire policy, and finally recognise the enormous value family-owned businesses bring to the UK.”
Not everyone has been quite so critical. Ade Babatunde, senior financial planning director at wealth and asset management firm Rathbones, said the Chancellor had “thrown a lifeline” to family businesses and farmers with the changes. “This could be a game-changer for SMEs ahead of next April’s shake-up, sparing many from selling assets just to pay tax,” he said.
Babatunde did stress, however, that estate planning is still getting trickier. “Beyond fiscal drag, new IHT changes are coming: reduced Business and Agricultural Property Reliefs, pensions included from 2027, and frozen thresholds. The Treasury still wants a bigger slice of the ‘great wealth transfer’,” he added.
