Government facing legal challenges over 'family farms tax'

Newsletter issue – October 2025

Chancellor Rachel Reeves announced changes in her October 2024 Budget that would reduce inheritance tax relief for farms and family-owned businesses. Starting April 2026, these entities will receive a £1 million exemption. Any assets above that threshold will face a 20% inheritance tax.

A group of farmers and business owners is seeking a judicial review. They argue the government failed to conduct a proper consultation before finalizing the policy, saying that the consultation held between February and April 2025 was deemed too narrow and technical.

The group is being represented by the law firm, Collyer Bristow, instructed by Alvarez & Marsal Tax - the group's advisors. Their goal isn't to overturn the policy but to ensure a fair consultation process. Many farmers are asset-rich but cash-poor, making the tax particularly burdensome. Thousands of them protested, warning the tax could force them to sell land or businesses to cover the bill.

The Treasury estimates the changes could raise £520 million annually by 2029-30. However, the Office for Budget Responsibility flagged the policy with a 'high' uncertainty rating.