Half of UK farms could go out of business by 2035 due to proposed changes to inheritance tax (IHT), as farmers grapple with the financial burden of the so-called “Family Farm Tax”.
That’s according to the findings of a survey, commissioned by Ashbridge Partners and involving 2,000 British farmers.
It reveals that 39% of farms will be unsustainable within the next five years, with 56% expecting to close by 2035.
See also: Inheritance tax in the spotlight at FW Question Time
The changes to agricultural property relief, set to take effect in April 2026, will restrict 100% IHT relief to the first £1m of combined agricultural and business property.
Above that threshold, farmers face paying a 20% tax levy, potentially leading to the sale of farmland and business assets.
Victoria Vyvyan, president of the Country Land and Business Association (CLA), described the research as “significant”.
It was revealed as thousands of farmers prepare to march in London on Tuesday, 4 March, for a Pancake Day Rally. The rally aims to send a unified message to chancellor Rachel Reeves and the Labour government: rethink the farm IHT plans or risk the collapse of family farms.
“The Ashbridge Partners’ survey reinforces the CLA research that points to an inescapable truth – English and Welsh farms and small businesses, for the most part, do not have the profits to pay this tax,” said Mrs Vyvyan, who is due to speak at the rally.
“These proposed changes fail to recognise that farm businesses will become unviable as they are forced to sell assets.”
One in 10 farms expect to face an IHT bill of more than £1m, with 31% expecting a bill of over £500,000, the survey reveals.
Land sales
The survey also found that 41% of farmers expect to sell off at least half of their business to cover IHT, with many fearing their land will fall into the hands of corporations or wealthy investors rather than remaining in the hands of traditional farmers.
Furthermore, 58% of respondents believe they will sell to UK or international corporations.
Mark Ashbridge, managing director of Ashbridge Partners, said: “These policies simply aren’t affordable or sustainable for the majority of farmers.
“If these proposals go ahead, we expect to see a wave of farmers seeking loans and other means to raise capital, but it’s unclear whether this will even be viable.”
The changes come amid increasing unrest in the farming community, with thousands of farmers rallying in London in protest.
Merseyside farmer Olly Harrison, one of the organisers of Tuesday’s rally, said: “Any politician’s priority should be to keep its nation fed. These are scary times for farmers, and if we don’t change course, we could see rationing return.”
A UK government spokesperson said: “Our reform to Agricultural and Business Property Relief will mean estates will pay a reduced effective inheritance tax rate of 20%, rather than standard 40%, and payments can be spread over 10 years, interest-free.
“This is a fair and balanced approach, which fixes the public services we all rely on, affecting around 500 estates a year.”
CLA urges members to write to MPs on clawback mechanism
The Country Land and Business Association (CLA) is urging members to pressure the Treasury to consider its clawback proposal as part of its campaign against inheritance tax changes.
Members are being encouraged to write to MPs, urging them to push for a meeting between the Chancellor and rural economy representatives.
The CLA’s proposal suggests applying the full 40% tax rate on inherited assets sold within a specified period, unless reinvested in the business.
The landowners’ organisation says it is committed to fighting changes to agricultural property relief and calls for collective action to amplify its message.