UK Farmers Shocked: Inheritance Tax Threatens Their Future
UK farmers are “shocked and frightened” by inheritance tax changes, facing higher costs and uncertainty that threaten profitability and future viability.
An independent review has found that farmers are "shocked and frightened" by the government's proposed changes to inheritance tax, with many questioning the future of their businesses.
The long-awaited report, commissioned by the government, was published on Thursday and contained 57 recommendations to improve productivity, investment and resilience in agriculture.
But the author, Baroness Minette Batters, a former president of the National Farmers Union (NFU), warned there was "no magic bullet" to making farms profitable in England.
Environment Secretary Emma Reynolds said the government and the farming and food industry would work even more closely together in the future.
She said this would be done through a newly created Farming and Food Partnership Board, comprising senior leaders from industry and government, which would "drive growth, productivity and long-term profitability across the sector".
The Secretary of State added: "When farming thrives, the whole country benefits. British farmers are vital to our food security, our rural economy and the stewardship of our countryside.
"This is about taking serious action to remove barriers, boost investment and improve the food system so that farming businesses can grow, invest and plan for the future with confidence."
Baroness Batters' review called for a "new deal for profitable farming" that recognises the true cost of food production and works for the environment.
The report did not go into detail on the government's proposed changes to inheritance tax, which are due to come into effect from April 2026 at a rate of 20% on farming businesses valued at more than £1 million.
But Baroness Batters said almost everyone she spoke to in the farming sector as part of the review raised it as their biggest concern.
'Viability questioned'
He said the sector had faced rapidly rising costs and persistent adverse weather, including a severe drought this year.
The closure of applications for the Sustainable Farming Incentive scheme – the post-Brexit agricultural payments scheme – and uncertainty over proposed changes to inheritance tax had caused “considerable” concern, with some farmers “questioning not just profitability but viability”.
In the review, he said: “The farming sector is bewildered and frightened about what the future holds.” The report said costs would be 30% higher in 2026 than in 2020, while the £2.4bn farming budget for England has remained virtually unchanged since 2007 – all while farmers and growers are being asked to do more to comply with environmental regulations, with less funding and no certainty.
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Baroness Batters said: “Farmers don’t want handouts from the government, they simply want to be able to run thriving, profitable farming businesses earning a fair price for what they produce.”
The NFU said it was “a thorough and comprehensive report” that was “right to identify that reform is needed”.
President Tom Bradshaw said that of the issues raised, fairness in the supply chain was the “biggest priority”, along with planning reforms and a focus on increasing exports.
He added: “But alongside this, there are some more immediate steps that need to be taken to support British farming, such as providing much-needed clarity and certainty on the future of the Sustainable Farming Incentive and getting the damaging inheritance tax changes right.”
Gavin Lane, president of the Country Land and Business Association, which represents rural businesses and landowners, welcomed the review and said it was now time for “urgent action”. He said, "As this report shows, profit margins in this sector are very low, with farmers struggling with high input costs, low commodity prices, and volatile weather conditions.
"Many farming businesses are operating on wafer-thin margins or at a loss, yet they will soon face inheritance tax bills that they simply cannot afford, which in many cases will be far in excess of their annual profits," he explained.
In response to the review, the government said it is also taking action on planning reforms to make food production a clear priority, to speed up the construction of on-farm reservoirs, polytunnels, and farm shops, and to make it easier for farmers to invest.
A spokesperson for the Department for Environment, Food and Rural Affairs (Defra) said the government is also accelerating action on fairness in the supply chain, removing barriers to private finance, and supporting exports and new markets.
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