6 days ago
Record number of farms shut in wake of inheritance tax raid
A record number of farms were forced to close for good this year after Rachel Reeves's tax raid made the future of thousands of rural businesses unviable.
A total of 6,365 agriculture, forestry and fishing businesses have closed over the past year, according to the Office for National Statistics (ONS), the highest since quarterly data was first published in 2017.
The majority of these closures took place during the first six months of the year after Ms Reeves, the Chancellor, announced in October that she would cut the amount of inheritance tax relief available to family farms.
Just 3,190 businesses in the sector have been set up over the same period. It leaves a net loss of 3,175, indicating the number of farms is shrinking at the fastest pace on record.
Victoria Atkins, the shadow environment secretary, said the farm closures were a result of 'Labour's disastrous tax policies'.
She added: 'The crippling NICs increases, alongside the family farm and family firm taxes, are destroying generational businesses, creating job instability and even leading to devastating suicides.
'These statistics prove that Labour do not understand our rural communities and our rural communities cannot afford Labour.'
Lee Anderson, a Reform UK MP, said rising taxes and red tape were 'pushing British farming to the brink'.
'No government in modern history has done more damage to rural Britain than Labour is right now,' he said.
'Farms are closing at twice the rate new ones are opening. This is completely unsustainable. Labour has betrayed the industry that helped build this country.'
'Beaten from post to pillar'
Farmers are also grappling with the soaring cost of fertiliser and a poor harvest following the recent drought and floods last year.
James Grindal, a 55-year-old third-generation farmer in South Leicestershire, said the poor weather and barrage of costs mean new farmers and entrepreneurs are reluctant to set up businesses in the industry.
He said: 'Yields are quite a bit down this year, it has been so dry – we have not had decent rain for four or five months.
'People have been beaten from post to pillar. Whichever way you turn you seem unwanted.
'The Government is not over-supportive of us, with inheritance tax relief disappearing.'
Mr Grindal's 84-year-old father still works on the farm and remains a part-owner. However, he warned that the Chancellor's tax raid meant that when his father dies, the family will be unable to invest in the farm as planned.
Mr Grindal said: 'He is still actively involved in the farm – he still sits on tractors occasionally, why shouldn't he own a bit of the land he has worked hard to own? Out of nowhere [this tax was] dropped on us.
'When he passes away we are going to have to pay a fair bit of tax on that. It will probably stop us from doing some of what we are doing.
'I could understand the tax if we were going to sell it. But we are not, we are going to keep growing corn and feeding people.'
Currently, family farms do not incur inheritance tax, receiving full relief on the usual 40pc rate. Under the changes introduced by Ms Reeves which take effect from April 2026, inheritance tax will be charged at a rate of 20pc, above a threshold of £1m.
Farmers have objected that their businesses are typically cash-poor and low-margin, meaning they will be forced to sell chunks of their land to settle the bill.
Mr Grindal said that the tax changes meant his teenage sons would be even more reluctant to take on the family business.
'There are not many people coming new into the industry. I've got two boys, 19 and 17, and I very much doubt they will come into farming,' he said.
'There is not a great deal of encouragement to get up at the crack of dawn and work all day and not get much reward for it, when they see what else they can do.'
Confidence at 'rock-bottom'
Tom Bradshaw, president of the National Farmers' Union, said confidence in the industry was 'at rock-bottom' with farmers facing 'a number of challenges.'
The inheritance tax rise came as 'another bitter blow and another attack', he said.
Mr Bradshaw added: 'It creates this continuing sense that the industry isn't valued and its worth to the country isn't being recognised.
'I can understand why the psychology is there that people will be taking the decisions that they may be resigned to sell off, and they are no longer able to make a living off it.'
Victoria Vyvyan, president of the Country Land and Business Association, said taxes and red tape were undermining farmers' efforts to make ends meet.
She said: 'This report says what ministers won't: rural businesses are being pushed to the edge.
'Farmers trying to modernise or diversify are blocked at every turn – by red tape, by National Insurance rises, by a government that talks growth while pulling out the foundations beneath it.
'Still, the countryside carries on. New businesses are opening. People are holding on. But grit isn't a strategy. What's needed now is simple: stability, clarity, and a government willing to listen – before more farms are lost and more families are forced out.'
Michael Oakes, who sold his dairy business last year and now runs a beef herd in the West Midlands, said the rising demand for renewable energy was also compounding farmers' woes.
He added: 'You've got some landlords taking land out of food production to put into solar.'
Ms Reeves's tax change, which alongside a similar reduction in the relief for family businesses is set to raise up to £520m per year for the Exchequer, caused immediate political ructions with farmers driving tractors into central London to protest outside Parliament.
MPs also heard emotional evidence from family farms about the dangers of the tax raid.
Jonathan Charlesworth, a farmer in Yorkshire, said his father, John, took his own life in fear of the inheritance tax raid.
Other farmers have told The Telegraph that the impending increase has opened a 'suicide window' for elderly business owners who worry they will impose a financial burden on their children and grandchildren by staying alive beyond April of next year.
Any hopes the plans might be softened were dashed with the publication of the Finance Bill this week which confirmed the changes will come into force next year.
A Department for Environment, Food & Rural Affairs spokesman said: 'Our commitment to farming and food security is steadfast and farming profits in the UK increased by £1.6bn last year.
'We are slashing costs and red tape for food producers to export to the EU, have appointed former NFU president Baroness Minette Batters to recommend reforms to boost farmers' profits, and we're ensuring farmers get a bigger share of food contracts across our schools, hospitals, and prisons.'
