In a massive Christmas U-turn by Sir Keir Starmer, the government has announced a huge climbdown on inheritance tax on farmers.
The tax relief on family farms handed down between families is to increase from £1m to £2.5m, meaning only farms worth more than £5m will pay.
The climbdown, overturning bitterly unpopular proposals in Rachel Reeves’s budget last year, follows a personal intervention by the prime minister.
The National Farmers Union (NFU) president Tom Bradshaw revealed the government backed down after he had two “very constructive meetings” with the PM.
Responding to the climbdown, Mr Bradshaw – who led a high-profile campaign which included tractors blocking Whitehall – said it would come as a huge relief.
Tory leader Kemi Badenoch claimed it was a “huge U-turn” by the government and a big win for her party’s campaign against Labour’s “family farms tax”.
But the shadow environment secretary Victoria Atkins claimed it was only a partial U-turn on the “vindictive family farm tax” and was too late for some farmers. Businesses and lives had been lost, she said.
Announcing the climbdown, Environment Secretary Emma Reynolds said: “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.”
The U-turn was given a warm welcome by the NFU, which has led the relentless protests in Westminster and around the UK.
Mr Bradshaw said Tuesday’s announcement would “greatly” reduce that tax burden for many family farms
He said: “Changes to Agricultural Property Relief (APR) and Business Property Relief (BPR) announced in last year’s budget came as a huge shock to the farming community.
“Until that moment, the best tax planning advice was to hold on to your farm until death and pass it on to the next generation who could continue to run a viable farming, food-producing business.
“The original changes to APR and BPR, contained within the Finance Bill, resulted in a pernicious and cruel tax, trapping the most elderly and vulnerable people and their families in the eye of the storm. The NFU and its members have stood strong for what we believed in.
“I am thankful common sense has prevailed and government has listened.”
The climbdown also follows a mini-rebellion in the Commons in early December in a vote on the inheritance tax proposal, when around 30 Labour MPs representing rural areas abstained and one, Markus Campbell-Savours, voted against and had the Labour whip withdrawn.
‘A big win for the Conservatives against a cruel and immoral tax’
Ms Badenoch, who has campaigned against the tax during several farm visits, said: “This is a huge U-turn by the government and a big win for the Conservative Party’s campaign against Labour’s family farm tax.
“The family farm tax is cruel, immoral and will not raise any money because farmers will stop farming. It would have pushed farms to the brink, damaged our food supply, and hurt the people who work long hours to feed the country.
“This fight isn’t finished. Other family businesses are still affected by Labour’s tax raid, and we will keep pushing until the tax is lifted from them too. But today is an important win, and proof that standing up for what’s fair, even when the odds are against us can make a real difference.”
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Tim Farron, the Liberal Democrats spokesperson, urged the government to scrap the “unfair tax in full” as “many family farms will still find themselves financially crippled and barely making the minimum wage”.
Reform UK deputy leader Richard Tice said: “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.
“With British agriculture hanging by a thread, the government must go further and abolish this callous farms tax.”
