The government has announced a U-turn on its inheritance tax policy for farmers.
On Tuesday, the Department for Environment, Food & Rural Affairs (DEFRA) confirmed it would be increasing the threshold when farms are brought into inheritance tax from £1m to £2.5m.
This will allow spouses or civil partners to pass on £5m in assets before paying inheritance tax.
Overall, the move will halve the number of estates impacted by the reforms, which were initially announced in the 2024 Budget.
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According to DEFRA, around 85% of estates will now be protected from higher inheritance tax.
The Guardian’s Jessica Elgot reports that the U-turn will cost the Treasury £130m, although this hasn’t been confirmed by the government.
In a press release, DEFRA said the government had “listened to concerns of the farming community and businesses about the reforms.”
They continued: “Having carefully considered this feedback, the government is going further to protect more farms and businesses, while maintaining the core principle that the most valuable agricultural and business assets should not receive unlimited relief.
The U-turn comes just months before the changes to inheritance tax relief for farmers were due to come into effect in April.
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.”