Farmers’ protests in London: The inheritance tax conundrum

This week, the streets of London have been filled with the voices of farmers protesting against the recent changes to inheritance tax (IHT) announced in the Autumn Budget. The new rules, set to come into effect in April 2026, have sparked widespread concern and anger within the farming community, highlighting the complex and often fraught relationship between agricultural heritage, economic viability and tax policy.

The new inheritance tax rules

At the heart of the controversy are the modifications to Agricultural Property Relief (APR) and Business Property Relief (BPR), which have historically provided 100% inheritance tax exemptions for agricultural and business properties. Under the new regulations, these reliefs will be capped at £1 million, with any value exceeding this threshold subject to a 20% inheritance tax.

For many farmers, this change is not just a matter of numbers; it threatens the very continuity of their family businesses. Farms with assets valued over £1million, which includes land, machinery, and other business assets, will now face significant tax liabilities when these assets are passed down to the next generation. This is particularly problematic given that many farms are asset-rich but cash-poor, with average farm incomes often insufficient to cover the added burden of inheritance tax.

Economic implications for farmers

The economic reality of farming in the UK is stark. Average returns on capital for farms can be as low as 0.5%, and many farms have seen their incomes decline significantly in recent years. 

Let’s take a look at our average cereal farm. 

Crop output details:

• Wheat output fell by nearly a quarter
• Barley and oilseed rape output also decreased due to lower yields and prices

Input costs:

• Variable costs increased by 27%
• Fertilizer costs rose by 44%
• Crop protection costs rose by 22%

Fixed costs:

• Increased, particularly for machinery (depreciation and running costs) and general farming costs

All things considered, cereal farms made an average loss of £26,400 on agricultural activities for the 2023-24 period. 

Considering this, the impact of inheritance tax could be ruinous. Farmers may be forced to sell parts of their land or other assets to pay the tax, a move that could be terminal for some family legacies. The National Farmers’ Union (NFU) and the Country Land and Business Association (CLA) argue that the Government’s estimates of only 500 farms being affected annually are far too low, suggesting that up to 70,000 farms could be impacted due to the combined value of land, machinery and other assets.

Protests and public reaction

The protests in London reflect the deep-seated frustration within the farming community and its supporters. Farmers and campaigners argue that the Government’s changes will not only harm family farms but also risk pushing up food prices as farms struggle to maintain their operations. The fear is that the next generation of farmers will be forced to abandon their livelihoods due to the financial burden imposed by the new tax rules.

The protests saw many famous faces turn up to show solidarity, including Jeremy Clarkson, owner of Diddly Squat Farm, who made a public statement emphasising the need for the Government to be “big enough” to acknowledge its error and reverse the decision. He stated that the tax changes could be “the end” for many farmers and appealed to the Government to support family farms.

Read more: Clarkson urges Starmer to ‘admit farm tax mistake’. 

Government rationale and criticisms

The Government’s rationale behind these changes is to close a tax loophole that had allowed wealthy individuals to use farmland as a shelter for their wealth. The uncapped relief has been criticised for exacerbating wealth inequality and inflating land prices, making it difficult for new and aspiring farmers to enter the industry.

However, critics argue that the Government’s approach is misguided. They point out that the new rules do not distinguish between genuine farming operations and those using farmland as a financial investment. This lack of distinction will lead to unintended consequences, such as forcing family farms to sell their land, which would undermine the very fabric of rural communities.

Potential solutions and mitigations

While the changes are set to take effect, there are strategies that farmers can employ to mitigate their impact. Additionally, the new rules allow for the tax to be paid in instalments over 10 years, which could provide some relief for cash-strapped farms.

However, such measures may not be enough to alleviate the widespread concern. The farming community is calling for a more nuanced approach that recognises the unique challenges and contributions of agricultural businesses. As the debate continues, it is clear that finding a balance between tax fairness and the preservation of family farms will be a critical challenge for the new Labour Government.

In conclusion, the protests in London highlight a broader issue that goes beyond mere tax policy. It is about the future of farming, the preservation of rural heritage and the economic viability of an industry that is crucial to the nation’s food security. As the Government navigates this complicated situation, it must listen to the concerns of farmers and work towards a solution that supports both the integrity of the tax system and the sustainability of family farms.