Tax climbdown to 'protect ordinary farms'

THE Government will raise the inheritance tax relief threshold for farmers from £1 million to £2.5 million in a climbdown following months of protest.

- SOPHIE WINGATE AND NINA LLOYD

The change to the reforms initially unveiled at Labour's first Budget last year comes after ministers "listened to concerns" of the farming community and businesses, the Department for Environment, Food and Rural Affairs (Defra) said yesterday.

The original Treasury plans to raise money as farmers pass their businesses from generation to generation triggered protests with tractors outside Parliament and criticism from some Labour MPs in rural seats.

And Baroness Minette Batters, the former head of the National Farmers' Union (NFU) who led an independent review for the Government, warned that the proposals had led to farmers contemplating suicide to avoid the tax changes.

The higher threshold, which will take effect in April, will allow spouses or civil partners to pass on up to £5 million in qualifying agricultural or business assets between them before paying inheritance tax on top of existing allowances, Defra said.

A 50% relief will apply to qualifying assets above that level.

The number of estates facing higher inheritance tax will be reduced from around 2,000 under the original plans to up to 1,100, hitting only the largest farms, according to the Government.

Farmers currently do not pay inheritance tax on agricultural and business assets which they pass on.