The threshold for farm inheritance tax (IHT) will be increased from £1 million to £2.5 million per estate after various organisations called for change.

The new policy is set to be introduced in the Finance Bill in January next year and will be effective from 6 April.

The Government said it listened to feedback by the farming community and businesses about the additional pressure that would come from the higher inheritance tax.

The National Farmers Union (NFU) welcomed the decision after previously advocating against the raised IHT changes.

NFU president Tom Bradshaw said: “Changes to Agriculture Property Relief (APR) and Business Property Relief (BPR) announced in last year’s Budget came as a huge shock to the farming community.

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“Until that moment, the best tax planning advice was to hold on to your farm until death and pass it on to the next generation, who could continue to run a viable farming, food-producing business.

“From the start the government said it was trying to protect the family farm, and the change announced today brings this much closer to reality for many. I’d like to thank the Prime Minister for recognising the policy needed amending and the Chancellor for bringing in the spousal transfer in the Budget.”

Emma Reynolds, environmental secretary said: “Farmers are at the heart of our food security and environmental stewardship, and I am determined to work with them to secure a profitable future for British farming.

“We have listened closely to farmers across the country, and we are making changes today to protect more ordinary family farms.”