The succession crisis facing farmers as Reeves eyes inheritance tax raid

Younger generations abandon the agriculture industry in pursuit of brighter futures

When Paul Isaac first realised his son wasn’t going to take over the family farm, he was heartbroken.
His 250-acre farm had been in the family for three generations, since his grandparents moved to east Devon in the 1930s. It was naturally assumed that it would pass on to his children.
But when his son, Daniel, was just 13, the seamless succession plan was tipped on its head.
“We were doing some harvesting and we’d gone up and down the field a few times picking up the grass. My son looked at me and said: ‘Is this all we’re going to do?’. I told him, ‘yes and we’re going to do it all day’ and he said, ‘gosh, that’s boring’,” says Isaac. “That was the first time I thought, he’s not going to want to do this.”
After some difficult conversations, it became clear that his son would pursue a different path – a decision that took him a long time to accept. “It was always expected in small family farms that the son would carry it on. That was the rite of passage.
“But he saw the long hours and all the family occasions we missed, and didn’t want to do it. I thought, well this is the end of the farm – and it really did upset me.”
Today, his son has a successful career as a design engineer for a military vehicles manufacturer, and the two have a good relationship.
However, Isaac, 57, is still deeply concerned about the future of British agriculture as he knows his experience is far from unique.
Between 2010 and 2017, the average age of a farmer in the UK jumped from around 56 to 59, as younger generations of farming families increasingly opted to leave the industry in pursuit of higher salaries, shorter hours and less physically demanding working conditions. Compare that to the entire UK workforce, which has an average age of 42.
Today, young farmers comprise a vanishingly small proportion of the agricultural workforce – 16- to 34-year-olds make up just 6pc, while two-thirds are aged 55 or over, according to the Office for National Statistics.
Without a succession plan in place, small farm owners nearing retirement are being left with little choice but to sell up to larger, commercial farms or to repurpose the land, such as converting it into glamping sites or wedding venues.
Shrinking profit margins, strict regulations and lingering uncertainty around post-Brexit policies are all adding to the pressure to abandon the sector.
This has already had an impact on the agricultural landscape in Britain. Since 2006, the amount of land used for farming has fallen by nearly a million hectares, a drop of more than 5pc.
As well as putting the country’s food security under increasing pressure, it is fundamentally changing the character of the countryside, turning it from a patchwork of family-run operations to a more homogenous mass.
“People who live in the local area know the farmer, they’ll chat with them and get to see the animals,” Isaac says. “I think we’re in danger of losing that personal relationship that can be built up with the public that small farms tend to do. With big commercial farms it tends to be more industrialised – it becomes sort of one step away.”
The erosion of particular skills connected with food are also a concern. The Government’s Environment, Food and Rural Affairs Committee has already identified “a crisis in succession” in areas where new entrants are lacking specific expertise, such as agronomy, soil science and plant pathology.
The children of north Somerset-based farmer Alf Tyler* have also pursued careers beyond agriculture – one is a custody sergeant, and the other a senior science teacher at a secondary school.
The 69-year-old places the blame for farming’s succession crisis at the door of supermarkets and the impact they have had on the sector’s falling profit margins.
“Because of the stranglehold that the supermarkets have [on the purchase of food] and their buying power, which they often use to the detriment of the primary producer, the hours are long and the returns are poor.
“If you can’t find the capital to do it and the money’s awful, why would any youngster want to go in to do it when they can sit at a computer screen and earn I don’t know what sort of money?”
British farmers typically receive less than 1pc of profits if supplying a supermarket chain, according to a 2022 report by the University of Portsmouth. Soaring costs of production in the wake of the pandemic and the war in Ukraine have made the situation even worse.
Isaac says these financial pressures have become more stark as young people are exposed to the broad range of opportunities on offer outside farming.
“I went to a grammar school and the careers officer asked where everyone was from. I said I live on a farm and he said, ‘well you won’t have to worry about anything because you’ll go into farming’. That was the attitude of the teachers back then.
“Now, kids go to school and there are so many opportunities. They can work 37 hours a week and earn more in a month than what I could have earned in six months. They see a better standard of living – and actually having a life.”
Farming’s financial challenges are being complicated further by the phasing out of the EU-derived Basic Payment Scheme (BPS), long considered a financial safety net for farmers. This includes the end of the “Young Farmer’ payment which provides a 25pc top-up payment for those under 40.
Among BPS’s chief replacements is the Sustainable Farming Incentive, which rewards those whose practices protect and benefit the environment, such as planting hedgerows and reducing the use of pesticides. However, some are sceptical that it will offer an adequate replacement for BPS – which can supplement up to 90pc of a farm’s income.
Luke Cox, a 28-year-old arable farmer from the Cotswolds, never considered abandoning his family’s farm because he values “working outside in the wonderful countryside” and contributing to Britain’s “world-leading sustainable food industry”.
Yet he fears that the lack of sufficient government support will make it easier for young people already unsure about the long hours and harsh conditions to justify walking away.
“Farming is certainly a job you do because you really enjoy doing it. If you didn’t enjoy it, you’d find some of the days really tough and long, particularly if it’s wet or cold outside,” Cox says.
“But there are also substantial financial challenges in farming. We’re losing BPS payments which allowed us to produce the third-cheapest food in the world because it provided a subsidy. Growers are now having to reconsider how they’re going to farm and make it a viable business.
“I’m very fortunate that I come from a family farm that owns the land. A lot of people are really struggling to justify it without that – which shouldn’t be the case.”
Even for parents whose children are willing to take over the farm, there is a danger that changes to agricultural relief for inheritance tax could make it financially unviable.
As the Government weighs up various ways to plug its £22bn public finance “black hole”, many in the agriculture sector worry that the relief, which allows farmland to be transferred between generations without incurring inheritance tax, will become a target.
Conservative MP, Greg Smith, warned in the lead-up to the election that if Labour launched a tax raid on farms, “virtually every family-run farm in this country will die”.
Isaac agrees that the consequences on small farms could be catastrophic if that relief is ended.
“[If] the parents don’t forward plan, which regrettably a lot of them don’t, the next generation is going to have to sell half the farm to pay perhaps 45pc inheritance tax, which will then make the farm unviable,” he says.
There are glimmers of hope for the future of farming, however. Applications from 18-year-olds to study agriculture, food and related degrees have increased by 20pc since 2019, according to university and college admissions body Ucas.
Cox attributes this rise to the impact of more food-conscious consumers and TV programmes that celebrate the industry, such as Clarkson’s Farm.
“The UK produces food to some of the highest and most sustainable standards in the world. Because of that people are getting more engaged and interested in what we’re doing,” he says.
“In the longer term, there are some really good foundations that have been laid recently that will mean more and more people will be looking to enter the industry. The important part will be ensuring they don’t meet the barriers that will stop them proceeding through the industry.”
Those running farms with no succession plan, like Isaac, face the prospect of selling up, with generations of toil coming to an end.
“Eventually those farms, which I suppose might happen to ours, will be split up and sold to bigger farms. You will gradually see the demise of small family farms.”
And as Isaac has learned, forcing children to follow in their parents’ footsteps is unlikely to either solve farming’s succession problem or lead to a happy family setup.
“I know situations where the children haven’t come home [to farm] and the relationship with their parents has completely broken down.
“It was a hard decision that I had to accept. But my son now has a successful career, as does my daughter, and we have a great relationship with them both and their partners. That’s more special to us now than them carrying on farming.”
*Name has been changed.