4 in 10 British farms could go out of business by 2030 due to Inheritance Tax changes
More than a third of UK farms could go out of business in the next five years, rising to 56% by 2035, according to a new study of 2,000 British farmers on the impact of the Labour government’s changes to inheritance tax (IHT).
Last week the government doubled down on its decision to press forward with its inheritance tax changes during a meeting with the National Farmers Union (NFU), Tenant Farmers Association (TFA), Country Land and Business Association (CLA) and Central Association of Agricultural Valuers (CAAV). Dubbed the ‘Family Farm Tax’, the decision was met with stark warnings by NFU president Tom Bradshaw and came ahead of the NFU’s annual conference on the 25 February.
The government’s change to Agricultural Property Relief (APR) from 6 April 2026, will see 100% relief from IHT restricted to the first £1m of combined agricultural and business property. Above this amount, landowners will pay up to 20% IHT, paid in instalments over 10 years, interest free, and a couple can pass on up to £3m free of inheritance tax.
Farmers’ Family Farm tax bill over £1m
According to the new study commissioned by finance and mortgage advisory firm Ashbridge Partners, over one in 10 farmers say they will face an IHT bill of over £1m due to the inheritance tax hike, with more than a third (31%) expecting to pay over £500,000.
The average Farm Business Income (FBI) was £86,000 across all farm types in Great Britain, according to 2022/23 data, with 17% failing to make a positive FBI that year and only 41% making over £50,000. At the average income level, it would take inheritors 11 to 12 years to pay off an IHT bill of £1m – more than the government’s 10-year instalment option.
Furthermore, only 40% of farms polled by Ashbridge Partners expect to fall below the proposed tax relief caps – leaving the equivalent of 125,400 UK farms* above the threshold – a stark contrast to the government’s estimates of ‘significantly less than 500 estates per year.’
In total, 60% of farmers worry that their business won’t be financially sustainable in the future if ministers forge ahead with their plans.
Olly Harrison, British farmer and influential farming voice, said: “Any politician’s priority should be to keep its nation fed. I’m shocked by the lack of understanding by government of what UK farms do, three times a day, every day for everybody in the country. These are scary times and not just for farmers. The question is, will we see ration books again or even a ration app?”
Selling off land and assets
To cover the cost of their inheritance bill, nearly half (41%) of the farmers surveyed will have to sell off at least half their farm business with 39% selling off farmland.
When asked who they would likely have to sell their land to more than half (58%) believe they will end up selling to UK and International Corporations or ‘Tycoons’ – potentially threatening the future of UK farmland staying in the hands of traditional UK farmers. Previous industry reports indicate that, in the last 12 months, private and institutional investors, along with “lifestyle” farmers, account for more than half (53%) of agricultural land purchases in England. Just 47% of acquisitions were from traditional farmers.
Searching for capital
In response to the government’s Inheritance tax plans, in November last year approximately 13,000 farmers descended on the capital in protest. Subsequent rallies in December, January and earlier this month saw hundreds of tractors line the streets of central London and city centers around the country, as the sector contemplates the reality of having to sell their business or assets to cover the ‘Family Farm Tax’. According to Ashbridge Partners’ research, 17% of respondents said they will have to sell agricultural buildings, 7% will need to sell vital machinery, and 4% are considering selling other properties, while 27% said they will need to liquidate shares and future investments. Nearly one in ten will have to go as far as to sell the farmhouse and 23% also reported that their farm shop could be at risk of sale, putting over 360 shops – 1581 currently in operation – at risk of closure or under new ownership.
Mark Ashbridge, managing director of Ashbridge Partners, said: “The proposed changes could dramatically affect farming families and businesses. With over half of UK farms at risk in the next 10 years, 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 exploring other forms of raising capital to cover these IHT costs, which, when you take into account the average farm is making £86k a year, again brings into question the viability of these tax changes.”