Farmers shrinking their businesses over Labour's inheritance tax, poll reveals

The CLA polling, which had some 700 respondents, found that some people are trying to reduce the value of their businesses to avoid unaffordable inheritance tax bills.

Some farmers are actively shrinking their businesses to reduce the damage from Labour’s inheritance tax changes, new polling has found.

Research from the Country Land and Business Association has revealed that almost 90 per cent of rural family businesses have paused all investment.

This includes cancelling the creation of new holiday homes, stopping growing crops and delaying building reservoirs to cope with drought.

One respondent said: “I am doing everything I can to devalue my business to reduce the tax burden for my children.”

Of those who say they’ve cancelled investment, more than a third have shelved projects worth over £150,000, while 64 per cent have abandoned plans worth over £50,000.

And the polling, which had some 700 respondents, found that some people are trying to reduce the value of their businesses to avoid unaffordable inheritance tax bills.

In her first budget in 2024, Rachel Reeves announced she was reforming agricultural (APR) and business property relief (BPR), the discount to allow farms and family businesses to be passed down through the generations.

The Chancellor said she was introducing a discounted rate on businesses valued at over £1m, a hugely contentious move that farmers said would force them to sell off land and change the fabric of the British countryside for good.

One inquest revealed that a farmer had taken his own life when worried about the deadline earlier this year. Just before Christmas, the Government announced that it was increasing the threshold to £2.5m, with married couples allowed to combine their relief to £5m.

However, nearly 85 per cent of respondents to the CLA’s poll said this is not enough to cover the value of their business, citing the rising cost of machinery, livestock and crops.

Instead, the findings reveal that family-run businesses – typically asset-rich but cash-poor – would be forced into a cycle of sales or debt to cover this tax, undermining the long-term viability of the rural economy, jobs and communities.

This comes on the back of one of the worst harvests on record, after an exceptionally dry spring and summer.

The CLA is calling for new Prime Minister Andy Burnham and Chancellor John Healey to scrap the tax at the Budget, saying otherwise their promise for “growth in every postcode” is impossible.

President Gavin Lane said: “We’ve warned for years that the logic behind this tax is perverse and self-defeating. Now the data proves why.

“Families who’ve spent decades building up their businesses are being forced to shrink them down again just to keep hold of them.

“They are scaling back ambitions, letting buildings deteriorate, and stripping out value, all to pass on businesses that may no longer be profitable.

“Burnham says he wants growth in every postcode. But this will be impossible until he reverses the tax actively destroying it. Family businesses want a leader who can help them invest and expand and drive forward the economy.

“At the next budget, Burnham has a chance to prove he’s more serious on growth than his predecessors. He must reverse the tax, deliver a proper rural reset, and get the countryside moving again.”

During his by-election campaign in Makerfield, Mr Burnham said: “I personally have heard from farmers on family farms and I do think that needs looking at again.”