The government has announced that the level of the Agricultural and Business Property Reliefs threshold will be increased from £1m to £2.5m when it is introduced in April 2026 - a major u-turn and a relief for family farms.

The announcement, made on December 23, 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.

The government says it has listened to concerns of the farming community and businesses about the reforms.

Caroline Voaden, MP for South Devon, who had condemned the government’s initial family farm tax policy, said: “It is a relief that the Government has finally listened and backed down on its disastrous family farm tax policy. That it took them over a year to do this is an indictment on how little they understand the rural economy.

“It was immediately clear to many of us how harmful the policy in its original form could be. For a Government committed to boosting our food security, it was illogical. If we undermine British farming we also undermine our ability to feed the nation and. In turn, compete in an increasingly uncertain world.

“Now, the Government understand this, it must go further. The Liberal Democrats are calling for the Government to scrap this untax in full and boost support for our farmers, starting with a £1 billion increase in the farming budget.”

The u-turn has been largely welcomed by the National Farmers’ Union and Country Land and Business Association which have campaigned against it for the past 14 months.

The change will be introduced to the Finance Bill in January and will apply from April 6.