London – Thousands of farming families and small business owners across the UK are bracing for major financial disruption as the government moves ahead with controversial inheritance tax reforms set to take effect in April 2026.
Announced in Chancellor Rachel Reeves’ first Autumn Budget, the new rules will dramatically reduce the Agricultural and Business Property Relief thresholds. Under the changes, only the first £1 million of qualifying assets will be fully exempt, with amounts beyond that taxed at a reduced 20% rate—half the standard inheritance tax rate of 40%.
The UK Treasury insists that the reforms are aimed at closing tax loopholes and will only impact the “wealthiest 500 estates annually.” However, farming unions and financial experts argue that the impact could be far wider—potentially affecting tens of thousands of family-run businesses and farms that are land-rich but cash-poor.
“This is not just a tax change. It’s a direct threat to the future of multi-generational farms and small enterprises across rural Britain,” said Aled Jones, President of NFU Cymru, during testimony before the Welsh Affairs Committee.
‘Family Farm Tax’ Faces Backlash
Across the UK, the policy is being dubbed the “family farm tax”, with protests erupting in rural areas and in central London. Farmers have staged high-profile demonstrations, including a tractor convoy through Whitehall, to voice opposition to what they see as a blow to inheritance planning and rural stability.
“The Labour government’s changes show a disregard for the reality of farming in Wales and across the UK,” said Plaid Cymru’s Ann Davies, accusing ministers of being out of touch with rural life.
Critics warn that these tax burdens could force grieving families to sell off portions of farmland or business assets to cover their inheritance liabilities, undermining succession planning and threatening the breakup of long-standing family enterprises.
Government Defends ‘Fair and Balanced’ Policy
Despite the backlash, Treasury Minister James Murray defended the policy this week, saying it strikes a balance between raising vital funds and maintaining support for small businesses.
“Three-quarters of estates will still pay no inheritance tax at all,” Murray said. “And for those that do, the rate is just 20%, with payments spread interest-free over 10 years.”
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He added that the reforms were necessary to help address the UK’s £22 billion public finance gap.
Political Pressure Mounts
The Conservative Party, Liberal Democrats, and Reform UK have all spoken out against the reforms. Tory MP Andrew Griffith warned that the policy “will carve up successful enterprises,” and pledged to reverse the tax if his party returns to power.
Meanwhile, Reform UK leader Nigel Farage has doubled down on calls to abolish inheritance tax entirely, calling it a “cruel and immoral double tax” on families who have already paid a lifetime of dues.
Experts Call for Transitional Relief
Tax experts are now urging the government to consider transitional safeguards, such as inflation-linked thresholds or exemptions for elderly asset holders. Many worry the sudden shift could trigger years of litigation, delays, and HMRC investigations.
“The reforms will bring major compliance burdens and risk destabilizing rural economies,” said Adam Craggs, tax partner at RPC law firm.
As the policy enters its consultation phase, industry bodies and farming leaders continue to lobby for amendments. But with Labour signalling it will not back down, the UK’s inheritance tax row is only just beginning.