Farmers across England and Wales are withholding investments in their operations amid concerns over inheritance tax liabilities, with many fearing significant financial burdens that could threaten the viability of their family farms.

Hannah Darby, 38, whose family owns an arable farm near Peterborough, described the prospect of her uncle facing nearly £500,000 in inheritance tax as “completely devastating.” The potential tax bill has caused the family to halt plans to expand their holiday lets, including converting a small shed into a two-bedroom rental property at an estimated cost of £200,000. Additionally, an initiative to install a 16-kilowatt solar panel system intended to power these holiday homes has been postponed. Darby warned that if forced to pay the tax, the family might have to sell land, which would undermine the farm’s long-term viability.

Darby’s experience reflects findings from a recent poll of 700 farmers conducted by the Country Land and Business Association (CLA), an industry group representing rural landowners and businesses. The survey found that nearly 90 percent of farmers have paused investment plans to avoid triggering inheritance tax. Many respondents have cancelled or deferred projects such as the development of holiday accommodations, purchases of crucial farm machinery like tractors, and investments in water storage infrastructure aimed at addressing the ongoing drought conditions affecting much of England and Wales. Some farmers reported allowing buildings to deteriorate due to financial uncertainty.

The inheritance tax in question applies to estates valued above £2.5 million, with the affected threshold made more accessible by ongoing land price inflation. Although the tax’s imposition on farms was moderated under former Labour leader Sir Keir Starmer, it continues to place substantial pressure on farm owners, particularly those without spouses or civil partners, who face fewer relief options. Many farmers maintain ownership and active involvement in their land well into old age, reluctant to transfer ownership or reduce their control, which complicates efforts to manage potential tax liabilities. While it is possible to avoid some inheritance tax by gifting property more than seven years prior to death, many farmers are either unwilling or unable to do so, especially given concerns about longevity and the desire to remain on their land.

The CLA warns that a significant proportion of farmers surveyed might have to sell sizeable portions of their land to cover tax bills. Approximately 25 percent indicated they would need to sell more than half of their landholding, while nearly 50 percent said they would likely have to dispose of at least 25 percent. The CLA is urging Prime Minister Andy Burnham to remove inheritance tax on farms entirely in the upcoming autumn budget to prevent further disruption to the agricultural sector.

In response, the Department for Environment, Food and Rural Affairs acknowledged the challenges faced by farmers and said it is initiating “a new conversation” with agricultural stakeholders. The department highlighted a recent £65 million package aimed at helping farmers cope with this year’s severe drought and referenced new grants designed to support resilience and productivity in the sector.