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After months of fierce protests by farmers, Labour has downscaled its plan for the so-called ‘tractor tax’
Alex Ross & David MaddoxTuesday 23 December 2025 18:06 GMT- Bookmark
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CloseRelated video: Farmers bring their tractors to London on the day Rachel Reeves announces her autumn Budget in the latest protest
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Farmers across the country are celebrating after Sir Keir Starmer caved in following months of pressure from farmers and watered down plans to tax inherited farmland.
Under the plans, announced by chancellor Rachel Reeves last year, farmers were to be charged 20 per cent on agricultural assets above £1m from April 2026. This triggered a storm of fury, with fears that family-run farms would be worst affected.
But on Tuesday, Labour said it was raising the threshold from £1m to £2.5m, meaning that most farms would not have to pay it.
open image in galleryKeir Starmer has faced strong criticism from rural communities over the inheritance tax raid on farms (AFP via Getty)The climbdown comes after crunch talks between National Farmers’ Union (NFU) president Tom Bradshaw and the prime minister last week, The Independent understands, following a year of protests about the measures.
Gareth Wyn Jones, a farmer from North Wales who was one of the leaders of the protests against the tax, told The Independent the announcement was “great news”, while former Top Gear presenter Jeremy Clarkson, who has also been very critical of the policy, welcomed the climbdown.
Meanwhile, a farmer whose father killed himself the day before last October’s Budget amid worries over the inheritance tax changes said the government’s climbdown was “the best Christmas present for a lot of farmers”, but he accused ministers of demonstrating “a complete lack of understanding and compassion” in relation to rural communities.
Jonathan Charlesworth, who found his father John Philip Charlesworth dead in a barn on their farm in Silkstone, Barnsley, said: “It’s a welcome U-turn that won’t bring back the lives lost over the last year or so due to the anxiety caused, but will hopefully prevent a flood of suicides running up to the commencement in April.”
He added: “The flip side is, it should have been researched and put out to review before any announcement was made.”
The higher threshold, which will take effect in April, will allow spouses or civil partners to pass on up to £5m in qualifying agricultural or business assets between them before paying inheritance tax, on top of existing allowances, Defra said.
In addition, farmers will get 50 per cent relief on qualifying assets above the threshold, paying a reduced effective rate of up to 20 per cent rather than the standard 40 per cent.
The number of estates facing higher inheritance tax will be reduced from around 2,000 under the original plans to around 1,100, meaning it will affect only the largest farms, according to the government.
Farmers do not currently pay inheritance tax on agricultural and business assets.
Mr Bradshaw said: “After months of NFU campaigning, the government has today announced changes to the threshold for inheritance tax for family farms. These changes mark a huge victory for British farmers.”
open image in galleryFarmers have been taking their protest to parliament since the plans were first announced (Reuters)Campaign group No Farmers, No Food welcomed the news, but warned that the climbdown did not go far enough. They said: “Huge news for family farmers. The Labour government have finally U-turned on the inheritance tax on family farms. It’s still not enough, but it’s still a huge victory for everyone who has relentlessly campaigned on this.”
Mo Metcalf-Fisher, director of external affairs for the Countryside Alliance, said: “This partial change to the disastrous family farm tax is welcome. It has caused months of unnecessary pain and suffering. It’s clear the government has realised that the growing perception that it is at war with the countryside is toxic.
“Whether the government will learn the fundamental lesson of this policy debacle, which is that it needs to work with the rural community – not legislate against it – remains to be seen. The government has a very long way to go to rebuild trust.”
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.
“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 fury over the so-called “tractor tax” or “family farm tax” prompted regular protests in London, with tractors descending on Whitehall.
After Sir Keir had reached out to the farming community before the 2024 election, the change to inheritance tax was seen as a “breach of trust”, with farming groups warning that even with the climbdown today, Labour will “find it hard to win back” their confidence.
open image in galleryEnvironment secretary Emma Reynolds announced the newly amended plan (PA Wire)The issue dominated responses to a recent review of farming incomes and profitability, carried out on behalf of the government by former NFU president Minette Batters, which was published last week.
Even tax expert Dan Neidle, the architect of the proposal to introduce inheritance tax on farm assets, had warned that the original £1m threshold was far too low and should have been closer to £20m.
Tory shadow environment secretary Victoria Atkins described the climbdown as “too little, too late”.
She posted on X (Twitter): “At long last, Labour has snuck out a partial U-turn on their vindictive family farm tax. It is too late for some, however. Businesses and lives have been lost. Rural communities will not forget the distress, pain and panic this government has caused them.”
The Liberal Democrats’ rural affairs spokesperson Tim Farron welcomed the news, but added: “It is utterly inexcusable that family farmers have been put through over a year of uncertainty and anguish since the government first announced these changes.”
Reform UK’s 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.”
This is just the latest major economic policy Sir Keir’s government has U-turned on in the 17 months since winning the election. The attempt to get rid of winter fuel payments for 11 million pensioners was largely abandoned, while the government stepped back from a bid to slash welfare by £5bn a year after a rebellion by Labour MPs.
Sir Keir also reversed his position on keeping the two-child benefit cap after pressure. And a planned hike in income tax was abandoned before it was implemented after the chancellor had announced it was likely to happen.
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