Inheritance tax changes are just one of many concerns for UK farmers.

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Tens of thousands of British farmers plan to gather in London on Tuesday to protest changes to inheritance tax cuts in the latest Budget, which the industry says will deal a major blow to family farms.

Reforms to Agricultural Property Relief (APR) and Business Property Relief (BPR) see farmers and agricultural landowners previously exempt from paying inheritance tax levied at 20% on assets exceeding $1 million from April 2026 It means that it will happen.

Changes to inheritance tax relief have been a key catalyst for protests, but this is just one of many concerns.

Farmers say the sector is suffering from pressures including climate change, real cuts in subsidies, high inflation, razor-thin margins and increased competition from Britain's post-Brexit trade deal.

How many farming companies are there?

Despite tax breaks for farmers designed to ensure the continuity of family farms after their death, the sector has undergone rapid consolidation.

Intense competition among retailers has led to lower prices paid to farmers for produce and narrowing margins, while increasingly erratic weather and the removal of EU subsidies have led to a record number of farm closures in recent years.

The number of farms in the UK is expected to fall by 22% by 2040 as smaller businesses struggle to compete and go out of business, according to consultancy Andersons Center.

This decline could have serious implications for rural economies that have traditionally relied on agriculture as a source of employment, the center said.

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How have land values ​​changed as a result of the relief measures?

Farmland values ​​have soared as new types of buyers, attracted by APR and BPR exemptions, enter the market.

According to land officials, one of the main reasons for purchasing farmland is inheritance tax reduction. Profit-seeking buyers from non-agricultural backgrounds have increased the demand for land, thereby driving up land prices.

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Land values ​​may also normalize as new land comes on the market, according to analysts, as some farmers are forced to sell land to pay death taxes.

The big question now on everyone's lips is what effect the reforms will have on land values. said Kelly Hewson-Fisher, head of rural research at Savills. The assumption is that profits from land investment have decreased due to tax cuts.

Why is the number of actual farmers purchasing property decreasing?

The number of properties actually acquired by farmers has steadily declined in recent decades.

Wealthy individuals and institutional investors and lifestyle buyers, who buy rural land for pleasure rather than to run it commercially, have purchased half of available farms in 2023, more than twice as many as farmers, according to land agents Strutt & Parker. That's a lot of land. In 2023, 40% of buyers will be farmers, compared to 60% in 2014.

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Agents said the previous tax regime had been one of the main attractions for buying UK farmland, but after the Budget changes it still gave it an advantage over other asset classes and remained attractive as a hedge against inflation.

What happened to farmer incomes?

Agricultural income is decreasing as the government gradually abolishes direct agricultural subsidies. Since Britain left the EU, the sector has been transitioning from the Common Agricultural Policy bloc to a new scheme that rewards farmers for improving the natural environment and biodiversity and reducing emissions, rather than providing direct payments to farmers.

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The direct payments were in the process of being phased out between 2021 and 2027, but Labor announced in the Budget that it would accelerate the phase-out period. This means farmers will see their subsidies cut by up to 79% next year.

Farm incomes have already fallen sharply year after year as cuts in agricultural subsidies and erratic weather affect yields. This month the Department for Environment, Food and Rural Affairs (Defra) published annual agricultural finance data for the year to February, which showed average incomes fell for all farm types except pigs and poultry.

Grain farmers' income fell 73% compared to the same period last year, while dairy farmers' income fell 68%.

How many farms are affected?

One key area of ​​disagreement between Labor and farmers is as the Budget addresses how many farms will be affected by the tax changes.

The Treasury found that 73% of previous agricultural property relief claims had been reduced to less than $1 million and concluded that the majority of farms would not be affected by the new standards.

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But NFU chief executive Tom Bradshaw argued that focusing solely on previous claims did not provide an accurate picture. That's because many people claiming less than $1 million in relief are likely private homes with a few acres to graze rather than actual farming businesses.

Instead, the group points to official farm business figures, which show that only 34% of farms are worth less than $1 million. In response, the government countered that since most farmers who want to pass on property are married, two spouses can claim relief in addition to personal allowances, bringing the limit closer to $3 million.

Additional reporting by Jim Pickard

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