Average-sized family farms will see their profits plummet following Labour's decision to slash tax breaks for farmers, according to new research.
The Country Land and Business Association (CLA) says their calculations show inheritance tax (IHT) bills wiping out profits every year for 10 years as a result of changes announced in the Budget by chancellor Rachel Reeves.
Labour has argued that 73% of farms would be unaffected by a decision to cut Agricultural Property Relief (APR) and Business Property Relief (BPR) - but farmers' group dispute this.
Farmers from April 2026 will face a £1m ceiling on 100% relief and after that will pay 20%.
The CLA's modelling shows typical 250-acre arable farms could be forced to sell 20% of their land.
It says a typical 200-acre farm owned by an individual with an expected annual profit of £27,300 would face an IHT liability of £435k.
If this is spread over 10 years, farms would need to allocate 159% of their profit each year to cover the tax bill. Or if they want to pay the bill off they would need to 20% of their land.
According to the CLA calculations, even a 250-acre arable farm owned by a couple with an expected annual profit of £34,130 would face an IHT liability of £267k, amounting to 78% of its profit each year over a decade.
The CLA says the tax changes could place an "overwhelming" financial burden on UK family farms.
If a farmer is married, his or her spouse would be able to pass on their relief to their successor, but even farms owned by two people will be severely affected, it has warned.
At best, they would be forced into a cycle of stagnation, asset sales, or debt to cover this tax burden, it says, as it urges the government to reconsider changes or risk undermining the future of family farming across the country.
Environment secretary Steve Reed is due to appear at the CLA’s annual Rural Business Conference on November 21 when he is expected to address farmers and rural business owners for the first time since this announcement.
CLA deputy president Gavin Lane - who farms in Norfolk - said: “Either the government isn’t being honest with the public about the true impact of these reforms, or they don’t understand the nature of rural businesses.
"I'd like to believe it is the latter and that they are prepared to listen to our input rather than continually trying to dismiss it.
“While they frame this as a tax on the wealthy, the reality is that ordinary family farms will be hit just as hard.
"Asking farms to use their income to pay a huge capital tax bill over 10 years, if indeed it is possible, will threaten the future of investment and the viability of the business.”
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