Watered-down government proposals to tax inherited farmland welcomed by Powys farm unions and politicians

The Government agreed on Tuesday to increase the planned threshold from £1m to £2.5m.

The climbdown follows months of protests by farmers and concern from some Labour backbenchers.

At last year's Budget, ministers said they would start imposing a 20% tax on inherited agricultural assets worth more than £1m from April 2026.

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."

"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."

Combined with the announcement during the UK Budget last month, that any reliefs will be transferrable between spouses, these changes will result in an effective £5 million allowance for married couples in a farming family.

These changes to APR and BPR are expected to come into effect on 6 April 2026.

FUW President Ian Rickman has said: “Today’s news will be a welcome early Christmas present for many farmers across Wales who have endured months of uncertainty and anxiety caused by the UK Government’s ill-thought-out changes to IHT.

“The Government’s initial proposals for IHT reform caused untold worry for farming families, and have seriously dampened confidence across the sector and wider rural economy, as farmers have feared for the long-term succession of their businesses.

The FUW has consistently advocated for a fairer approach to inheritance tax reform, and has for the past year lobbied hard for the UK Government to change course and adopt a more proportionate approach. These calls have been matched by opposition parties, multiple cross-party parliamentary committees, and growing numbers of the Government’s own Members of Parliament.

“At a time of considerable uncertainty and volatility for farmers across Wales, the UK Government’s revisions to the tax threshold represent some much-needed relief. 

“Though the FUW remains frustrated with the way the UK Government has approached these reforms, I would like to offer my thanks to Ministers in the Wales Office for their willingness to engage in dialogue with us on this issue to date.”

NFU Cymru President Aled Jones said: “ Over the past 14 months NFU Cymru, and its members, have been tireless in their efforts to amend the proposals, culminating in the ‘NO IHT’ mosaic display at the Winter Fair on the eve of this year’s budget.

“Today’s announcement, which sees the tax threshold raised from £1m to £2.5m, is a major development which will take many Welsh family farms above the threshold for Inheritance tax and will greatly reduce the tax burden for others. The change announced today, alongside the announcement by the Chancellor in last month’s budget to allow spousal transfer will mean that for many up to £5m in qualifying agricultural or business assets will be able to be passed on to the next generation before paying inheritance tax.

“When it became clear that we weren’t going to get rid of the proposals announced in the October 2024 budget NFU Cymru, alongside our colleagues in the NFU, NFU Scotland and Ulster Farmers Union, have left no stone unturned in lobbying for changes that would mitigate the worst elements of the original proposals.  Today’s announcement alongside the changes in the November budget will be very welcome news to many Welsh family farms, coming as it does just before Christmas, a time when families come together.”   

“I’d like to thank all our NFU Cymru members for their diligent and consistent lobbying of MPs, often having to share tragic and upsetting deeply personal stories with politicians and the media. I would like to thank the supply chain who stood by us throughout, recognising the damage that the original proposals would have caused not just to family farms but to rural Wales. The public have also been fantastic, with so many of them making up the 270,000 signatures I delivered to No 10 as part of the Stop the Family Farm Tax Petition earlier this year.

“We must also recognise the Welsh Labour MPs who were willing to meet with us and hear first-hand the human impact the original proposals would have had on farming families, who have stood up for their constituents and backed Welsh farming and rural Wales, and who in recent weeks demonstrated their support for our campaign by abstaining from the Budget Resolution 50.  We owe our gratitude to them for helping the UK Government make the changes needed.”

“Our thanks go to both the Westminster Welsh Affairs Committee and the EFRA Committee for their reports and recommendations on this matter and also the support of all the opposition parties.”  

“As a Union we have met with the Prime Minister, the DEFRA Secretary of State and the Welsh Office. I’d like to thank the UK Government for recognising that the original proposals would have caused untold damage to Welsh and British farming and for making the changes they have, which are very much welcomed and will make a significant difference to family farms the length and breadth of the Country.”

Welsh Liberal Democrat Westminster Spokesperson and Brecon, Radnor and Cwm Tawe MP David Chadwick said: “The Liberal Democrats were the first to call out and oppose the unfair family farm tax in last year's budget and we have been proud to stand alongside our Welsh farming communities to campaign against it ever since.



“This concession has been hard won, and I am so grateful to all the Welsh farmers who have fought tirelessly to achieve this, including many from my own constituency.



"This is about fairness and security, if we undermine Welsh farming, then we also undermine our ability to provide the country with the food we need to keep us secure in an uncertain world and to build a healthy nation.



“Despite this welcome change, many Welsh family farms will still find themselves crippled, with incomes barely at minimum wage levels. The Liberal Democrats still believe this unfair tax should be scrapped in full and will be submitting amendments in the new year to try to do so."