A quarter of farming households live below the poverty line, the Government's rural watchdog said as it urged ministers to help farmers access benefits and develop their businesses.

The poorest 25% of farms have a household income of less than £20,000 a year, and a third of those failed to make a profit over the past three years, the Commission for Rural Communities (CRC) said.

The CRC said many farmers in the UK had diversified or found ways to earn money away from the farm to survive, with 17% of farms making more money from their additional enterprises than from traditional farming activities. But some do not have the skills or opportunity to branch into new businesses such as farm shops, producing food or letting out farm buildings.

Struggling farmers are more likely to be older people grazing livestock in upland areas including the South Pennines, the South West moors such as Exmoor and Dartmoor, the North Pennines, the Borders and the Lake District.

The problems are particularly acute for tenant farmers, because they do not own their land, can be prevented from diversifying under the terms of their tenancy or find it difficult to access the capital to set up new ventures as the banks view them as having no collateral.

A report by the CRC also said that while farmers are able - like anyone else - to claim benefits when times are tough, the take-up of welfare payments was lower in rural areas than in towns. Around 11% of working-age adults in rural districts claim out-of-work benefits, compared with 16% in towns, the report said.

Just 23 of the 601 Jobcentre Plus offices are in rural areas and the lack of information, transport and internet access makes it hard for people in the countryside to make the most of welfare services. Many farmers feel reluctant to take benefits because they are independent and there is a social stigma attached, the report said.

In addition, some households find it hard to provide up-to-date accounts and tenant farmers struggle to access housing benefit because their tenancy agreements do not separate the rental costs of their home from the land.

The CRC called for the Department for Work and Pensions to actively promote the take-up of benefits for farming households and for the Department for Business Innovation and Skills to support farmers to develop their businesses.

CRC chairman Dr Stuart Burgess said: "While many farming households have successfully increased production, resilience and farm incomes, one in four are living in poverty. These struggling farms are likely to have grazing livestock and be located in upland areas. Many are left trapped in poverty without the resources or support to earn a living wage. Tackling poverty among farming households is long overdue. The Government should actively promote farm business support and the take-up of income-related benefits to eligible farming households."