The Labour Government’s announcement that the heavily criticised farm inheritance tax will be set at £2.5 million not £1 million has been welcomed by Cumbrian MPs.

The Agricultural property relief and business property relief, farm inheritance tax, will be reformed from 6 April 2026.

The allowance for the 100 percent rate of relief will be set at £2.5 million, with a 50 percent rate of relief thereafter.

This means a couple will be able to pass on up to £5 million of agricultural or business assets between them, on top of the existing allowances such as the nil-rate band.

The reforms to agricultural property relief and business property relief mean that only a small number of estates with agricultural and business assets will pay additional inheritance tax.

The government estimates that up to 185 estates claiming agricultural property relief, including those also claiming business property relief, are expected to pay more inheritance tax in 2026-27.

This means 85 percent of all estates claiming agricultural property relief in 2026-27, including those that also claim for business property relief, are forecast to not pay any more inheritance tax as a result of the changes.

Whitehaven and Workington MP Josh MacAlister said: “Family farms are the backbone of our rural economy here in West Cumbria, and it was vital that government understood how these reforms would work in practice.

“Over many months I’ve been speaking with local farmers and the NFU, and working alongside Labour MPs from rural constituencies across the country to take those views into detailed discussions behind the scenes with ministers in the Treasury and Defra.

“These were serious, constructive conversations about getting this right – and they’ve made a real difference.

“The NFU has said that common sense has prevailed and that the government has listened, and today’s announcement reflects that engagement.

“This change will take many family farms completely out of inheritance tax and significantly reduce bills for others, while still ensuring the very largest estates pay their fair share.

“From the start, the government said it wanted to protect family farms.

“Today’s decision keeps that promise to farming families in Cumbria.”

Commenting on the change Carlisle MP Julie Minns said: “I strongly welcome the announcement that the inheritance tax threshold will increase.

“I have met with ministers and advisers to press for amendments since the initial changes were first announced, and I am pleased that my representations on behalf of local farmers have been heard.

“It has been a privilege to take part in the NFU’s first-ever Parliamentary Food and Farming Fellowship scheme, this experience, combined with regular meetings and updates from Carlisle NFU and CLA members, has been invaluable in shaping the changes that I and others have been calling for, and which the Government has now listened to.”

Barrow and Furness MP Michelle Scrogham said: “Good news for family farms. The Government has announced an increase to the Agricultural and Business Property Relief threshold from £1m to £2.5m from April 2026. This means the vast majority of family farms will not pay any inheritance tax.

“I raised this issue after meeting with local farmers and the NFU, and I’m glad the Government has listened. This change protects family-run farms while ensuring the very largest estates still make a fair contribution.

“Family farms are the backbone of our rural communities, and I’ll keep working with farmers to support a secure future for British agriculture.”

While Liberal Democrat MP Tim Farron said: “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.

“Liberal Democrats were the first to call out and oppose the unfair family farm tax in last years Budget and we have been proud to stand alongside our farming communities to campaign against it ever since.

“This concession has been hard won, and I am so grateful to all the farmers who have fought tirelessly to achieve this.

“This is about justice and security – if we undermine British farming then we also undermine our ability to provide us with the food we need to keep us secure in an uncertain world.

“Yet many family farms will still find themselves financially crippled and barely making the minimum wage.

“We demand that the government scraps this unfair tax in full and if they refuse to, Liberal Democrats will submit amendments in the new year to bring it down.”

Agricultural property relief is a type of inheritance tax relief that reduces the amount of tax that farmers and landowners must pay when farmland is passed to the next generation.

Business property relief is similar, but for business assets that are part of the estate.

From 6 April 2026, the full 100 percent relief from inheritance tax will be restricted to the first £2.5 million of combined agricultural and business property. 

Above this £2.5 million allowance, impacted individuals will access 50 percent relief from inheritance tax on qualifying assets and will pay inheritance tax at a reduced effective rate of up to 20 percent, rather than the standard 40 percent.

This tax can be paid in equal instalments over 10 years interest free.

This is on top of the other spousal exemptions and nil-rate bands that people can access for inheritance tax too.

All individual estates have £325,000 tax-free threshold for inheritance tax (the nil-rate band).

Any unused £2.5 million allowance on the death of a spouse or civil partner is transferable to a surviving spouse or civil partner. This makes it like the nil-rate band.

This means a couple will be able to pass on up to £5 million of agricultural or business assets between them, on top of the existing allowances such as the nil-rate band.

The government is committed to reforming agricultural property relief and business property relief, while supporting farms and businesses.

This reform will support the government with its objectives to fix the public finances, and fund public services.