Market News

BY  James Rodger

Rachel Reeves has eased inheritance tax on agricultural property after pressure from farmers, the Labour Party Chancellor has announced. From April, farmers and small business owners who are married, are in a civil partnership or have deceased spouses, will benefit.

They will be able transfer their inheritance tax allowance of up to £1m of full relief to each other if one of them dies without having used their allowance. The change means a farmer could leave their £1m allowance to their partner, and use their own £1m allowance, to pass on £2m of farmland to their children without paying inheritance tax.

David Gunn, an arable farmer and agricultural contractor from near Sevenoaks in Kent, said his message to Labour was: “You said in the manifesto you would look after the farmers, which you totally haven’t, you’ve ruined the countryside.”

The tax expert Dan Neidle said the chancellor had made a “sensible change” that meant farmers would not need to take extensive long-term tax planning measures.

Tom Bradshaw, the president of the National Farmers’ Union, said: “It’s good to see the government accepts its original proposals were flawed. But this change goes nowhere near far enough to remove the devastating impact of the policy on farming communities.”

He added that the change would help widowed farmers but “it does nothing to alleviate the burden it puts on the elderly and vulnerable” and urged the government to address this with further measures.

HM Treasury and the Department for Environment, Food and Rural Affairs said: "The government has announced that any unused £1 million allowance for agricultural property relief and business property relief will be transferable between spouses and civil partners, to bring it in line with the treatment of the nil-rate band and residence nil-rate band.

"This makes the inheritance tax rules for those with agricultural and business assets less complex and fairer. This change will apply to widows and widowers, including where the first death is many years before 6 April 2026, who will now be able to benefit from double the allowance than they would have prior to the Budget 2025 changes.”