Sir U-turn strikes again! Labour waters down hated inheritance tax raid on farmers by raising threshold from £1m to £2.5m amid rural fury

Keir Starmer today moved to water down Labour’s hated inheritance tax crackdown on farmers amid widespread rural anger.

Under the original plan announced by Rachel Reeves in the 2024 Budget, farmers faced paying 20 per cent IHT on agricultural properties and land worth more than £1 million from April.

It sparked a wave of protests in London and a backlash from rural Labor MPs.

But in the Prime Minister’s latest U-turn, Defra today raised that threshold to £2.5 million and admitted it had taken action after ‘listening to the concerns of the farming community’.

This comes just over a week after Sir Keir said the reforms in their original form (expected to bring in around £500 million a year) were ‘sensible’.

A Defra spokesman said the change would halve the number of farms affected by the change to Agricultural Property Relief.

NFU President Tom Bradshaw said: ‘I am grateful that common sense prevailed and the government listened.

‘The government has said all along it is trying to protect the family farm, and the change announced today brings this much closer to reality for many.’

But shadow environment minister Victoria Atkins said the change to the ‘vindictive’ plan would be ‘too late for some’ and added: ‘Jobs and lives have been lost.

Defra today raised that threshold to £2.5 million, a week after Sir Keir said the reforms were ‘sensible’ in their original form.

‘Rural communities will not forget the distress, pain and panic this government has caused them.

It is the latest in a series of U-turns that have either watered down or scrapped the government’s proposals, following changes to pensioners’ winter fuel payments and two child benefit caps.

One despondent government source complained that, as with the winter fuel allowance, they had taken on all the political pain only to back down.

They told the Daily Mail: ‘And we’ll probably be saying the same about business rates and pubs in a few months.’

Other Labor veterans took a pessimistic tone about the U-turn, criticizing No10’s failure to recognize ‘political reality’ more quickly.

One joked that the climb was ‘very on-brand’ for Sir Keir.

But 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 ensure a profitable future for British farming.

‘We’ve listened closely to farmers across the country and today we’re making changes to protect more ordinary family farms.

We are increasing the individual threshold from £1 million to £2.5 million; This means couples with estates worth up to £5 million will no longer pay inheritance tax on their estates.

‘It’s right that larger estates contribute more, while supporting the farms and commercial businesses that form the backbone of Britain’s rural communities.’

An official report prepared for the government earlier this week said the IHT change had abandoned farmers. ‘confused and frightened’.

The farm profitability report, prepared by former National Farmers Union president Baroness Minette Batters, called for a ‘new deal for profitable farming’ that recognizes the true cost of producing food and distributing it to the environment.

He warned that some farmers, especially those growing field crops, were ‘questioning sustainability, let alone profitability’.

The terms of his review did not include controversial changes to inheritance tax but he said: was mentioned by almost all participants as the biggest issue regarding the viability of the farm.

‘The transition to IHT is a significant issue for the industry and I have great sympathy with their concerns,’ he wrote.

‘It was clearly stated in my job description that it was not my place to submit a proposal to the Government on IHT. But I couldn’t write this report without referencing him.’

He added: ‘The farming sector is confused and afraid of what might happen next.’

On December 15, Cat Smith, the Labor MP for Lancaster and Wyre, told the Liaison Committee, made up of senior parliamentarians who chair various Commons committees, that rural communities had “trusted Labor for the first time in a very long time” in their landslide election win in 2024, giving us a mandate for change in this country.

But he said farmers felt ‘misled’ by changes to inheritance tax and agricultural property relief announced in Rachel Reeves’ first Budget.

He said “elderly farmers or farmers with a terminal diagnosis are in a position to have their farms passed on to the next generation with no tax implications if they die before April”, but if they survive after that date they face the family farm becoming “completely uninhabitable” for their grandchildren.

He asked Sir Keir MP: ‘Can you see how farmers can feel that this Government is not treating them in the way they would expect to be treated as working people?’

The Prime Minister told him: ‘I understand the concern and I met with the chairman of the NFU (National Farmers’ Union), as I have discussed before, last week to address specific concerns that they had.

‘I think there needs to be a sensible reform of agricultural property assistance. And I think it’s a sensible reform.’

Liberal Democrat environment, food and rural affairs spokesman Tim Farron said the tax change should be scrapped altogether, saying: ‘It is absolutely inexcusable that family farmers have faced uncertainty and suffering for over a year since the government first announced these changes.’