The government has U-turned on its plans to launch an inheritance tax raid on farmers.

After months of intense backlash and protests in Westminster, Labour has increased the threshold – the point at which inhertance tax would apply on large farm estates – from land worth £1 million to those worth £2.5 million when it is introduced in April.

The new plan will also permit spouses to pass on £5 million of assets between them before they have to pay the inheritance tax.

This means the total number of estates impacted will drop from 375 to 185 – and the U-turn could cost around £130 million.

It comes after prime minister Keir Starmer told a Commons committee hearing last week that he had been told of farmers with terminal illnesses who were planning to kill themselves before the new rules came in to avoid the tax.

Environment secretary Emma Reynolds claimed the government’s change of heart came about after listening to those within the agriculture community.

She 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. We are increasing the individual threshold from £1m to £2.5m which means couples with estates of up to 5m will now pay no inheritance tax on their estates.

“It’s only right that larger estates contribute more, while we back the farms and trading businesses that are the backbone of Britain’s rural communities.”

But the new U-turn has caused frustration from those within Labour, too.

One MP told HuffPost UK: “Another hill we’ve been forced to climb only to be marched back down again. This government is like being stuck in a room with ‘The Thick of It’ on repeat.”

A rural Labour MP said the government had been “dragged along to do the bare minimum”.

Conservative leader Kemi Badenoch described the U-turn as a “big win for the Conservative Party’s campaign against Labour’s Family Farm Tax.”

She added: “This fight isn’t finished. Other family businesses are still affected by Labour’s tax raid, and we will keep pushing until the tax is lifted from them too. But today is an important win, and proof that standing up for what’s fair, even when the odds are against us can make a real difference.”

Reform’s deputy leader Richard Tice also pounced on the government’s flip-flopping.

He said: “Labour’s tax raid on family farms has already been a disaster for the sector, plunging countless farmers into despair, with heartbreaking reports of some taking their own lives in order to save their farms for future generations.

“This cynical climbdown – whilst better than nothing – does little to address the year of anxiety that farmers have faced in planning to protect their livelihoods. Even with the raised threshold, many family farms will still face crippling bills. With British agriculture hanging by a thread, the government must go further and abolish this callous farms tax.”

The Lib Dems’ rural affairs spokesperson, 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.”