Official UK government statistics on farm incomes tell us that the average income for general cropping farms – £53,000 – is 58 per cent lower than it was in 2022/23. Dairy farms’ average income has fallen by 78 per cent in the same period to £50,000, while the average income for farms grazing livestock is £26,000.
Lower prices for key outputs such as wheat are compounded by continued rises in input costs such as costs of straw (bedding), which have more than doubled, while electricity, fertiliser, animal feed and motor fuels have increased by 38–50 per cent. Other costs such as veterinary treatment, machinery, transport and labour have also increased. Farming has joined a long line of occupations that have seen incomes falling relative to the cost of staying afloat.
Another search will also tell you that the income distribution of farmers is highly unequal, much like the distribution of housing, land, wealth and most areas of the economy. In 2023/24, 30 per cent of farms failed to make a profit, while 52 per cent made more than £100,000. While the average income for farmers grazing livestock is £26,000 (a bit lower than the median income), the average income of specialist pig farmers, at £91,000 before tax, puts them in the top 4 per cent of earners. And that is not even to take into account wealth, which we know is more unequally distributed than income, or tenure: 54 per cent of farms are owner occupied, 32 per cent are mixed tenancy and 14 per cent are wholly rented. The think tank Tax Policy Associates has suggested that one third of the farm estates affected by the budget changes aren’t owned by farmers but held by investors for tax-planning purposes.
Mainstream media reporting of the ongoing farm protests, as ever, distracts, individualises and polarises. The result is, again as ever, that no one questions the wider implications of a neoliberal system breaking down before our eyes. Focusing on the likes of James Dyson and Jeremy Clarkson also obscures the more interesting political position of those farmers who are relatively high earners but wouldn’t describe themselves as such – those earning £50,000 and above – who more than likely do not know that they sit comfortably among the top 20 per cent of earners in the UK.
Inheritance tax is only paid by a tiny minority in the UK. Of the 1,800 estates claiming agricultural relief, the Institute for Fiscal Studies (IFS) (using HMRC estimates) points out that fewer than 500 farms (29 per cent) could potentially pay more inheritance tax. The much more drastic estimate that 75 per cent of farms worth over £1 million will be affected by the changes to the reliefs is calculated on the basis of farm output income and not all estate income. It also does not make allowance for any potential changes of behaviour to avoid paying inheritance tax, such as by making lifetime gifts of agricultural property more than seven years before death.
One specific feature of the reform that may leave farmers feeling unfairly treated is that those dying within the next seven years (but after the new regime takes effect in April 2026) who do not have a surviving spouse/civil partner will not have had an opportunity to avoid inheritance tax by making lifetime gifts. If their farm earns too low an income or the inheritor has too low an income to pay the tax, those owners may be forced to sell, which, as the IFS points out is the same as applies to those inheriting a family home. The IFS goes on to say that the government could choose to give current farmers or farm owners the same opportunity to avoid inheritance tax that owners of other assets have. As it stands, the reform already includes the option of paying the tax over a ten-year period.
What is more, inheritance tax relief for agricultural and business assets unfairly favours those whose wealth is held in those forms. In taxing incomes more heavily than capital, we continue to allow those with capital to accumulate it at a pace that those relying only on their wages could never compete with. As Thomas Piketty puts it, wealth grows more rapidly than the rate of growth of income and output, ‘capital reproduces itself faster than output increases. The past devours the future.’
The farmers’ protest exposes how badly designed the UK tax system is, how unfairly skewed it is towards capital over income and how successive governments have turned a blind eye to the negative consequences of using land as an asset and tax vehicle.
As the IFS argues, the government should directly support the use of land for food security and environmental protection by making it more financially viable irrespective of inheritance tax. Lowering the tax advantage of agricultural property should reduce its price, softening the impetus to sell farms, making farmland more affordable for those who want to buy it for productive uses and making it easier to get into farming. In other words, this reform moves inheritance tax in the right direction.
What is more, those with high incomes also tend to be those with the greatest wealth, and more likely to receive an inheritance. Therefore, reforming inheritance tax limits the negative impact that wealth transfers have in increasing inequality. Nevertheless, because of the natural desire for our children to have a better standard of living than we did, the principle of inheritance tax has always been unpopular. It seems even worse, as the government has allowed land to be much more lightly taxed than most other assets. This is symptomatic of a wider erosion of taxation by the wealthy over the last few decades to the point that seven out of eight European countries have got rid of their wealth taxes.
Courting business interests and the whims of farm asset managers has time and again proven itself to be short-termist, as is the case in many other areas of the economy. We only need to think of what Macquarie’s asset management did to Thames Water. Also, it will do nothing to address the pressures facing the country’s lack of collective investment in the infrastructure and resources we all need. Rather it will compound its problems.
The current government needs to initiate a new public conversation on tax as investment and to address public concerns over wealth inequality. It must be honest with the public about the colossal investment needed if the downward mobility of the majority of our children is ever to be reversed.
The public shows a clear preference for wealth taxes over other forms of taxation. Rather than continuing to allow mainstream voices to pit one group against another, relatively high earners – whether they are farmers or not – need to understand that servicing the interests of the most wealthy is not in their best interests anymore.
Gerry Mitchell is a policy researcher, currently working for the Independent Provider of Special Education Advice (IPSEA), also most recently for the Think-tank for Action on Social Change (Dublin), Friedrich-Ebert-Stiftung (Stockholm and London) and the Foundation for European Progressive Studies (Brussels).
Uncomfortably Off edited by Marcos González Hernando and Gerry Mitchell is available here on Bristol University Press for £12.99.
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