'Only limits the damage – it doesn’t eradicate it' - government waters down inheritance tax plan for farms but concerns remain

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Government plans to tax inherited farmland have been watered down after months of pressure from farmers, rural MPs and figures across the racing and bloodstock industries. 

The planned threshold for the new levy, originally set at £1 million, has been lifted to £2.5 million, meaning many smaller family farms will avoid the charge.

The reversal was announced by environment secretary Emma Reynolds after parliament had adjourned for Christmas. She said ministers had “listened closely to farmers” and that the new threshold would “protect more ordinary family farms” while ensuring larger estates “contribute more.”

From April 2026, inherited agricultural assets above the threshold will be taxed at 20 per cent – half the standard inheritance tax rate. When combined with spousal exemptions, couples will be able to pass on up to £5 million in qualifying assets.

While many farmers will welcome the concession, the move still falls well short of safeguarding the racing industry’s rural backbone. High land values in key racing counties mean many training centres, studs and long-standing equine properties remain exposed.

The National Farmers’ Union said the £2.5 million threshold removed many family farms “from the eye of a pernicious storm”, but Country Land and Business Association president Gavin Lane warned that the “announcement only limits the damage – it doesn’t eradicate it. Many family businesses will still sit above the threshold yet operate on tiny margins.”

Simon Sweeting, manager of Overbury Stud, told the Racing Post earlier in the year that the policy would make life far harder for many smaller operations: "If you want to breed or buy horses, it’s so much easier if you’ve got the land,” he said. 

"It will mean people are forced out of the breeding industry because they haven’t got the land to do it. It will take a while for the effects to be felt, we’re moving in that direction unfortunately anyway, but it will unquestionably accelerate it."

Peter Hockenhull, owner of Shade Oak Stud in north Shropshire, shared the frustration.

"I’m in an area where the average size of a farm is 200, 300 acres, family owned and run," he said. "Within all my neighbours, it’s of huge concern.

"I just think it reflects more about how the current government views people who have earned their assets. They don’t see them as hard-working people who have managed to achieve it, they see them as a revenue stream and it’s unfair."

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