Steep farm income fall questions ability to pay IHT

Latest Farm Business Income (FBI) figures from Defra for the harvest year 2023-24 confirm the sharp decline in profitability that many farmers have suffered, calling into question the sector’s ability to meet future inheritance tax demands.

The data, which updates initial estimates issued last March, show that farm incomes were lower for all farm types, except for specialist pig farms and specialist poultry farms.

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For example, cereal farms suffered a 73% drop in income to £39,400 on average, though this did follow two years of good profitability in the immediate wake of the war in Ukraine.

A combination of lower output prices and yields were key in driving down returns.

It was a similar situation for dairy farmers who, following two strong years, saw FBI drop 68% to average £70,900 in 2023-24, with a fall in the farmgate price of milk being the primary driver.

Smaller falls were seen on lowland grazing livestock farms (down 24% to £17,300) and upland grazing farms (down 12% to £23,500).

All farms in England also suffered from the continued phase-out of the Basic Payment Scheme, which on average fell by 21% to £18,300 in 2023, accounting for about 40% of net profit.

Response

NFU president Tom Bradshaw said the figures painted a stark picture of the challenges farmers have been facing.

“When these figures were first estimated back in March, we said that we needed a government that would create policies to support British agriculture and help farmers and growers to build financial resilience into their businesses,” he said.

“Instead, we have seen the opposite. The recent Budget announcing changes to agriculture property relief (APR) and business property relief (BPR) have left farmers reeling.

“Many will be faced with a tax bill of millions. Some will be forced to sell all or part of their farm to raise the funds.”

Mass lobby

The NFU has organised a mass lobbying event in London for next Tuesday (19 November) with the aim of persuading MPs to force a change in policy.

But so far the government is holding firm. A report on the BBC Radio 4 Today programme on Thursday (14 November) claimed Defra ministers had suggested to the Treasury exempting farmers aged over 80 from the tax.

But this has been denied by Defra.

A spokesperson said: “With public services crumbling and a £22bn fiscal hole inherited from the previous government, we have made the difficult decision to reform APR in a balanced and fair way.

“All ministers support the policy and it will not change.”

‘Staggering’

Martin Lines, chief executive of the Nature Friendly Farming Network, described the recent profit slump in farming as “staggering”.

“While there are multiple reasons for this, from global conflict to climate change to systemic issues within the food system, it hammers home that one of the biggest problems farming faces is lack of profitability for the goods and services farmers provide.”