There has been a lot of press coverage and social media comment on last week’s Budget and its impact on businesses in general and farming in particular. This Budget appears to seek to tax private business to pay for increased current spending with no incentive on businesses to invest for future growth and prosperity. Farming has been particularly impacted with changes to the Inheritance Tax rules.

On a positive, the Budget made relatively minor changes to Capital Gains Tax which will now have a top rate of 24%, with reliefs such as Holdover Relief and Rollover Relief still available.

From April 2026, Agricultural Property Relief and Business Property Relief will be restricted to a combined 100% relief on the first £1m of assets, with a 50% relief thereafter. This will cover all the assets within the business, including machinery, crops in store, growing crops, working capital, as well as the property assets. For many landowners and businesses, this will bring a significant part of the property and business assets chargeable to Inheritance Tax at an effective rate of 20%.   

This could place serious pressures on family farms, which are particularly affected as farming generates a low income on the considerable capital employed. The reduction in Business Property Relief has a significant impact and was largely unpredicted prior to the budget. 

The positive news is there is still £1m of assets which will not be liable to Inheritance Tax and 50% relief on other qualifying assets (with an effective rate of 20% inheritance tax) and with careful planning it should be possible to ensure that businesses are set up to maximise the available reliefs. It will lead to changes, possibly leading to earlier succession, and ensuring that different partners can maximise the £1m which is fully relieved. 

The Budget does not seem to alter the previous rules whereby some let property qualifies for Business Property Relief under the Balfour rules.  Risk management will need to deal with how the farming business meets the potential tax liability and that may lead to increased use of life insurance. Each business will need to consider their own circumstances and plan for potential impacts caused by these changes. Regardless of any tax planning, the changes from the Budget will lead to some considerable issues for certain businesses and unfortunately some may not have enough time to make the necessary changes due to the ownership and age profile. 

Bletsoes has been serving the farming community since 1881 and we have seen many changes brought about by changing taxation policies of different governments and have worked with and supported clients.  Throughout that time, farmers have shown an amazing ability to meet challenges and adapt. With careful planning, some of the risks can be managed and, whilst it will inevitably impact some businesses more than others, a review may be timely. Please do not hesitate to contact the team at Bletsoes, if you would like to talk through the impact upon you and your business.

David Bletsoe - Partner