The Starmer administration’s recent amendments to inheritance tax policies, unveiled in the 2024 Budget, have sparked considerable concern across the farming community with protests from across the country at the potentially damaging decision.
While the change, set to take effect in April 2026, aims to adjust inheritance tax reliefs for agricultural property, they may fail to address deeper systemic issues that threaten the viability of family farms in the long term.
From 2026, inheritance tax will apply to agricultural and business assets valued over £1 million at a reduced rate of 20%, rather than the full 40% applicable to other estates. While this ensures some relief for smaller family farms, it leaves those with higher-valued properties exposed which culminated in the splling out of farmers onto Westminster’s streets this week.
With average farmland values surpassing £10,000 per acre and many farms exceeding 500 acres, even modest holdings could face inheritance tax liabilities upwards of £400,000. This burden could force families to sell portions of their land to meet tax demands, compromising the continuity of farming businesses.
The bigger problem is transition
Beyond tax concerns, the farming industry grapples with an ageing workforce. Approximately 40% of farmers in England are over 65, and many are nearing retirement without clear succession plans.
A dwindling number of younger generations are choosing to enter farming, discouraged by its poor financial returns and uncertain future.
The declining interest in farming among younger generations is evident in multiple data points. For instance, only 13% of farmers in the UK are under 45, a figure that highlights the ageing demographic of the sector.
This challenge is compounded by a lack of succession planning in more than half of farming families, putting many farms at risk of uncertain futures, Farming UK previously reported.
The average profit margins for UK farms remain slim, with rising input costs and volatile market conditions exacerbating financial strain. These challenges deter many potential successors, who often view alternative careers as more lucrative and secure.
“Over two-thirds (68%) of young people fear a career in farming wouldn’t provide them with job satisfaction and 70% don’t believe they have the skills required to succeed,” the report said.
“Over half (52%) of farmers say their farm is failing to find the talent it needs, yet 64% of those aged 19 – 22 see a lack of people like themselves in the industry as a key barrier to entry,” it added.
An earlier, 2017 report notes many young people view farming as financially unviable, particularly when land acquisition and capital requirements are factored in. A NatWest report highlights that 55% of young entrants are deterred by not having a farm to inherit, while 36% struggle to find affordable leasing options.
Innovative solutions like share farming are gaining traction, but the trend towards larger farms limits their viability and access to entry for young families to start their own farms.
The Natwest report said that only 13% of farmers were under the age of 45 in 2015, but while fewer young people are entering the sector, their ideas are still needed to harness the technologies that can make farming an up-to-date industry.
Data from a survey conducted by the National Federation of Younger Farmers’ Clubs in 2020 suggested a significant majority (69%) of young farmers live within a farming family, with only 15% owning their property—potentially higher than the national average for their age group.
However, 65% feel there is insufficient housing available for young people in rural areas. Despite this, 97% wish to remain in rural areas over the next five years, although 73% aim to move within this timeframe to achieve greater independence. Limited resources remain a barrier, with 64% unable to afford property ownership.
The availability of youth-centric services in rural areas is notably low, including recreation facilities, youth clubs, and employment support schemes such as “Wheels to Work.” The most valued community facilities identified are village halls, youth clubs, and transport services like “Wheels to Work.”
However, gaps remain, with young people identifying entertainment, parish councils, and schools as missing amenities. Over 70% of respondents have sought advice on areas such as farming, training, and financial management, but housing and youth activities remain underrepresented in available information.
Interest remains high in some communities
Interest in farming and land management remains strong among rural youth, with 74% expressing a desire to pursue careers in these fields. Of these, 38% aim to work on their family farms, highlighting the importance of succession planning, which is regarded as the most significant challenge in achieving employment in farming. Awareness of key policy initiatives, such as the Environmental Land Management schemes (ELMs), remains limited, with 62% reporting unfamiliarity.
The pandemic significantly affected rural communities, with 58% of respondents feeling isolated during COVID-19. Its long-term effects are anticipated by 85% of young farmers. Many reported challenges such as labour shortages, fluctuating consumer demands, and the cancellation of agricultural shows and training events.
Diversified farm activities, such as holiday lets and events, also saw reduced income. In response, young farmers adapted by increasing direct-to-consumer sales, exploring online marketing, and piloting new diversification projects such as pick-your-own schemes and pop-up visitor facilities.
There is considerable pessimism regarding the future of rural living and farming. Over 81% believe it will become harder to live in rural settings over the next five years, while 56% foresee challenges in rural employment.
Also, 63% feel it will be increasingly difficult for new entrants to enter farming, and 66% are concerned about the prospects for the next generation of farmers. Diversification is seen as a necessity, with 78% believing farm businesses will not survive without supplementary income sources.
Ultimately, enthusiasm remains there from people in rural communities to take on farming, however, the long term effects of this policy by the current Labour administration could potentially have a delayed response effect with farms being carved up to pay off IHT bills.
