Government climbdown on farm inheritance tax – Carmichael responds

Orkney and Shetland MP, Alistair Carmichael, has welcomed news today that the Government will make a significant U-turn on farm inheritance tax. Ministers announced this morning that the government will increase the inheritance tax threshold for Agricultural and Business Property Reliefs threshold will be increased from £1m to £2.5m when it is introduced in April 2026. This allows 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. 

Mr Carmichael warned, however, that the government should take this as a lesson to engage further with farming and rural communities in the future, in order to secure better outcomes on other areas of policy such as agricultural support schemes, farm profitability and future trading relations with the EU.

Mr Carmichael is Chair of the House of Commons Environment, Food and Rural Affairs Select Committee, which earlier this year released a unanimous report calling for the farm tax changes to be paused and reviewed.

Mr Carmichael said:

“This is a major concession from the Government and should be welcomed as such. After a tough year, farmers and their supporters finally have a reason to give cheers this Christmas.

“I am proud of the role that the EFRA Committee has played in providing scrutiny to the Government and a voice for those impacted by these proposals. We have maintained the pressure on Government through our unanimous report calling for the tax changes to be paused, our questions to ministers over the past year, and most recently, reminding the Prime Minister of the intolerable pressures that farmers were under during the Liaison Committee session last week.

“The lesson here surely must be that the government should listen to farmers and the wider rural community across the piece on the issues that matter to us. The Government could have saved themselves a lot of time and heartache if they had started with an approach based on respect and genuine engagement. Whether it is on the farm tax, on support payments, regulation or future trading arrangements, the government will have a better time politically – and in terms of outcomes – if they engage more and dictate less.

“Farmers need clarity, stability and a system that genuinely works for them. If the Government is serious about supporting domestic food production and the long-term future of our rural communities, that will be the Prime Minister’s New Years resolution for 2026.”