Thousands of Farms Face Closure as Inheritance Tax Reforms Loom, Threatening UK Agriculture
The UK’s agricultural sector is experiencing a sharp decline, with thousands of farms shutting down as the industry prepares for Chancellor Rachel Reeves’s inheritance tax reforms, set to take effect in April. Analysis of Office for National Statistics (ONS) data by Cynergy Bank reveals that the number of agricultural businesses closing far outpaces new openings, painting a grim picture for the future of farming.
In the final quarter of 2023, 1,370 businesses in agriculture, forestry, and fishing ceased operations permanently, while only 670 new companies were established—less than half the number of closures. Over the past three years, the sector has seen a net loss of 7,850 businesses, with 16,905 closures and just 9,055 openings.
Nick Fahy, CEO of Cynergy Bank, described the findings as “a sobering picture of the UK business environment.” He highlighted the disproportionate impact on farming, stating, “With only half of closing agricultural businesses being replaced, farmers are grappling with rising costs, labour shortages, and the looming spectre of inheritance tax changes.” In contrast, sectors such as healthcare, real estate, and education are thriving, demonstrating resilience and adaptability in the face of economic challenges.
The impending inheritance tax reforms, announced in Chancellor Reeves’s October Budget, have sparked widespread concern among farmers. Currently, family farms benefit from agricultural property relief, which exempts them from inheritance tax. However, starting in April, this relief will be scaled back, with a 20% tax rate applied above a £1 million threshold—halfway toward the standard 40% rate. Combined with similar changes to business property relief, the reforms are expected to generate approximately £500 million annually for the Treasury.
Tom Bradshaw, president of the National Farmers’ Union (NFU), warned that the ONS data underscores the severe challenges facing UK agriculture. “Farmers and growers are navigating an increasingly volatile environment, exacerbated by fluctuating commodity prices, rising costs, and unpredictable extreme weather,” he said. “The burden of the family farm tax is intensifying these challenges, threatening the ability of many family farms to pass on their legacy to the next generation.”
Bradshaw expressed frustration over the government’s response, noting that during a recent meeting with the Treasury, the NFU’s concerns were largely ignored. “The Government must recognise that its stance is not only detrimental to farmers but undermines food security for the entire nation,” he added.
The broader UK business landscape also reflects a troubling trend. In the final quarter of 2023, 65,450 new businesses were established—the lowest figure since records began in 2017—while over 69,000 businesses closed. For the year as a whole, nearly 307,000 businesses were created, the lowest on record, though this still slightly outpaced the approximately 298,000 closures, thanks to growth in other sectors.
A government spokesman defended the inheritance tax reforms as “a fair and balanced approach which helps fix the public services we all rely on.” He acknowledged the challenges faced by farmers, stating, “For years, farmers have struggled to make a fair profit, faced spiralling costs, and been undercut by trade deals, forcing thousands out of business.”
The spokesman emphasised the government’s commitment to food security, citing a £5 billion investment in farming over the next two years—the largest budget for sustainable food production in UK history. He also highlighted plans to boost farm profits through reforms to public procurement and planning rules, aimed at supporting British produce and food production.
As the April deadline approaches, the agricultural sector remains on edge, with many fearing that the combination of rising costs, labour shortages, and tax reforms could accelerate the decline of family farming and jeopardise the UK’s food security.
