We at the National Farm Research Unit as part of Kynetec have designed and prepared a survey to understand how the current budget announcement on inheritance tax has impacted farmers succession plans
In light of the recent budget announcement, we at the National Farm Research Unit, part of Kynetec, wanted to give farmers an opportunity to feedback on how the updated policy changes to inheritance tax would impact their farm.
We reached out to 950 farmers; 326 (32%) were interested in taking part. This is what we found…
Farmer Succession Planning
We asked farmers prior to any questioning on the new Inheritance Tax plan what their intentions were with passing their farms on to the next generation
When considering the future of your farm is there a plan for the younger generation to take over?
A total of 68% of farmers said they already have a succession plan in place, leaving only 24% that said they do not have a plan set up for when they step away from farming.
Base – All - 326
Now that we understand how many farmers currently have a succession plan in place, let’s look further into who advises them
Succession Advise Pre-IHT Plan Breakdown
Who has advised you on your succession plan?
Of the 223 farmers that were receiving advice on their succession plan, 42% said they were getting advice from their Accountant, 32% had advice from their Lawyer, 16% said they had no advice and 10% were using other Consultancy/Agricultural advice services.
Base – 326; Yes, to Succession Plan - 223
Overview of succession plan advice
Of the 223 people that currently said they receive advice on their farm's succession plan, under 30% of them said that after the updates to the Inheritance Tax plan they will look to find advice from a new source.
Looking at the 35 individuals who said they currently receive no advice on their succession plan, nearly ¾ said they would look to start receiving financial advice following the release of the new Inheritance Tax plan.
Let's look further into the farmers concerns about the plan itself…
General Response Breakdown
Here we have taken all the farmer responses and categorised them based on whether the farmer believes the new succession plan would have a Positive, Negative, Need More Advice or Have No Affect to the farm and their future plans.
Farmer's Response To Succession Plan
How has the current budget announcement on inheritance tax impacted your succession plan?
Close to 60% of farmers believe that the suggested changes to IHT would have a Negative Effect on their Farm.
Only 1% of respondents thought that the updated policy would have a Positive Effect.
Base – 326; Active response – 277; Don’t know/N/A - 49
Looking further into the concerns of farmers…
Having found the majority of responses collected on behalf of the farmers to be negative, let's look further into what some of their main concerns are.
"We are not sure how we would foot the bill of IHT without selling land, which would make our 400ac farm, that has been farmed by my family for three generations, commercially unviable.”
“This will mean the farm, or a portion of it will have to be sold. This is likely to make it non-viable for the next generation to continue. They are now reassessing if they want to go into the industry as likely will need to have a second job to continue.”
“It has destroyed my plan and at the moment it has made it impossible for the next generation to farm due to the level of tax.”
“There is a significant risk that the financial burden will now be insurmountable.”
“It will mean selling parts of my business and having to stop producing food. I will probably be making some of my employees redundant too”
Negative Response Breakdown
Looking further into the negative responses, we can see some recurring themes as to why farmers are concerned about the budget effecting their future plans.
Result Of Negative Effect
How has the current budget announcement on inheritance tax impacted your succession plan
We found 22% of individuals believed that they would have to actively shut down their farming enterprise as a result of the budget changes.
27% of farmers told us that they were concerned their farm would no longer be inheritable due to the policy changes in Inheritance Tax.
Base – 326; Negative Responses - 160
Understanding the remainder of the responses…
After looking further into the concerns of farmers, let's now try to better understand what those who said the Inheritance Tax plan wouldn’t ‘negatively’ affect their farm actually mean.
Remaining Response Breakdown
A further look into understanding what the remaining responses that were not actively ‘Negative’ really show us…
How has the current budget announcement on inheritance tax impacted your succession plan
A total of 20% farmers felt unaffected by the new inheritance tax plan, only 2% of which could see it having a positive outcome.
The remaining 78% responses were unsure/neutral in understanding what effect they would see on their farm.
Base – 326; Remaining responses – 116
Results of the remaining response breakdown
Outside of those who feel the new inheritance tax plan will have a negative effect on their farm, that the majority of the remaining respondents know they will be somewhat affected, but are unsure of what this will mean for the future of their farm.
Summarised Responses (Neutral/No Effect/Positive)
“Will have to look at our situation, alter all current plans/arrangements to help ensure that the farm remains intact and viable”
“We have already transferred a lot of the farm ownership. The budget announcements should not have much of an impact”
“Although it seems like the destruction of farming in the UK. There could be great opportunities for new entrances and those with foresight and determination”
“We are going to have to take professional advice to make sure we are not adversely affected”
“No major difference at the moment as it aligns right with our plans. Shouldn't affect us too much”
Farm Enterprise Breakdown
A look into how the inheritance tax update is affecting different agricultural sectors
Negative Effect On Farm Enterprise
As we look at the separate sectors within agriculture, we can see that 55% of arable farms and 62% of livestock farmers are anticipating a negative outcome from the new inheritance tax plan.
Base – 326; Active response – 277; Don’t know/N/A - 49
Arable/Livestock roundup
We can see that all sectors of agriculture are expecting a significant amount of turbulence.
Over half in all instances said they were expecting a negative outcome, with livestock farmers expressing the biggest concern.
How do farmers feel the issues they face can be resolved?
After finding out the how the current budget announcement on inheritance tax has impacted the farmers succession plan, we then went on to ask how they feel the issues presented to them could be resolved
“Significantly change the current IHT Tax policy. Look at farms individually. If the farm is being passed to a direct family member it should be somewhat exempt from IHT”
“Increase the threshold of taxation upwards from its current level and make sure that farms being passed on are genuine agricultural businesses.”
“Increase the threshold for paying inheritance tax. Unfortunately, lots of people have bought land not to farm but to avoid tax this is drastically affecting the family farms”
“We all expect to pay some Tax, but it must be proportionate to earning capacity”
“Raise the tax threshold such that 90% of working family farms are unaffected”
Thank you
We would like to take the opportunity to thank all of the farmers who took part in our Succession Pulse Research, as well as those who help with our studies.
We hope you found our findings both interesting and insightful.
The National Farm Research Unit is proud to support the farming industry in the UK and Ireland. We have conversed with tens of thousands of farmers about topics that matter.
As part of our remit, we collect and communicate farmers’ views and opinions on key farming issues to the wider industry.