Chancellor Rachel Reeves delivered the Autumn Budget last week (30 October), with significant implications for farmers, landowners, landlords and developers. Our director, Trevor Wells breaks down the key announcements and shares his advice…
Agricultural and Business Property Relief
For those active in the rural property sector, the reduction in Agricultural and Business Property relief was sobering reading. From April 2026, Agricultural and Business Property relief will be subject to a combined £1m cap of 100% relief, with properties above this threshold only benefitting from 50% relief. This is effectively a 10% Inheritance Tax rate on anything over £1m in Agricultural and Business Property on the farm. For the government to say that only larger farms will be affected, and they have protected smaller family farms could not be further from reality. In our region, with values between £12,000 - £15,000 per acre, the £1m threshold would not even represent a viable farm in acreage, let alone where there is a house and range of farm buildings.
This reform will have widespread consequences among the agricultural industry, with the Country Land and Business Association estimating some 70,000 farms across the UK [1] will be affected. As a result, we anticipate more farmers being forced to consider selling or restructuring all or some of their holdings, which is disastrous for both British produce and generational businesses. The impact on farm land values is yet unknown, but we must prepare for adjustments and this could further impact on farming business with existing borrowing arrangements. The harsh reality is that most farms that find themselves in an Inheritance situation will not be able to borrow the required funds needed to pay this tax, due to the very slim margins in farming at the moment combined with relatively high borrowing rates, meaning the monthly repayments are unachievable for most to pay.
Of course, this is further compounded by the changes to Inheritance Tax, whereby combined business and agricultural assets valued above £1m, so land with “Hope” value, will no longer be fully covered by Business Property relief. This opens up farms to a potential tax on an unrealised, and potentially never realised, Hope value, which could be catastrophic for many farms.
Capital Gains Tax
Amendments to the rate of Capital Gains Tax (CGT) were the source of much speculation pre-Budget, and the outcome is perhaps not as devastating as originally feared. The Chancellor announced CGT will increase with immediate effect to 18% for basic rate taxpayers and 24% for higher rate taxpayers, bringing commercial property in line with residential rates. The £1m business asset disposal relief will be kept, however the tax rate will increase to 14% from April 2025 and 18% from April 2026.
Development Land & Planning
The government has a clear intent when it comes to housing, promising a £5bn investment in new homes as well as planning reform.
The housebuilding industry has welcomed said changes, albeit with a cautious optimism. Urgent clarification is needed over the planning reform process, including whether the promised “hundreds” of new planning officers will have the experience and strategic insight to deliver fast decision-making.
This being said, experts predict house sales will jump at the beginning of 2025[2] as purchasers look to beat stamp duty rises (buyers will pay SDLT over £125,000 and first-time buyers will pay SDLT over £300,000 from March 2025). This means housebuilders will be looking to build more homes in the short term, which will likely have a positive impact on land values.
The impact of this Budget has understandably drawn strong reaction and will have far-reaching consequences, for landowners and farmers especially. The one lifeline it has offered is the April 2026 deadline, meaning there is time available to reassess and put plans in place to restructure land, farms and other assets to reduce the impact as much as possible.
For advice and guidance on navigating these changes, contact Trevor or Tom.
[1] https://www.cla.org.uk/news/farming-budget-hit-with-real-terms-cut-and-inheritance-tax-reliefs-capped-by-chancellor/
