The Liberal Democrats are urging the government to exempt “working farms” from upcoming inheritance tax changes announced in the recent Budget.
From April 2026, agricultural properties valued over £1 million will be subject to a 20% inheritance tax, ending their previous exemption. For couples, the threshold will rise to £3 million.
The proposed changes have triggered widespread opposition from farmers, while Labour argues they are necessary to curb tax avoidance through the purchase of agricultural land.
During a House of Commons debate, Tim Farron, the Liberal Democrat rural affairs spokesman, called for a “working farm qualification exemption” to ensure the policy focuses on tax avoidance rather than genuine farming operations. Farron, who represents Westmoreland and Lonsdale in Cumbria, said in The BBC:
“Farmers are struggling, often with their mental health. The isolation you feel when you have farmed a valley for generations and might be the one who loses the family farm is utterly devastating.”
Farron argued that targeting non-active farmers for taxation would better align the policy with its intent while sparing active farms from undue financial strain.
Government Defends Policy, Farmers Voice Concerns
Treasury estimates suggest around 500 estates per year will pay the new inheritance tax. However, campaigners argue the changes could impact up to 75,000 farms across the UK.
Treasury Minister James Murray defended the policy, citing the need to repair public finances, but rejected claims of broader impacts as being based on inflated farm value assessments rather than actual tax liabilities. Murray emphasised Labour’s commitment to farmers, pointing to a £5 billion investment in farming and land management over the next two years as evidence of their support for the sector.
Conservative MP Sir Geoffrey Clifton-Brown expressed scepticism, warning the changes could lead to foreign investors and hedge fund managers buying farmland for alternative, non-agricultural purposes, removing prime arable land from production.
The debate, initiated by the Conservatives, saw Tory MPs call for the policy to be scrapped. Shadow environment secretary Victoria Atkins criticized the policy as a “vindictive tax” and urged Labour MPs with rural constituencies to reconsider their support.
Atkins referenced last month’s protest outside Parliament, where thousands, including TV presenter Jeremy Clarkson, voiced opposition to the changes. She called on Labour to “show humility and compassion” in addressing public concerns.
Despite opposition, some Labour MPs defended the changes. Maya Ellis argued that increased inheritance tax on farms could benefit farmers through broader fiscal reforms, including reduced energy prices and improved public services funded by the additional revenue.
