Chancellor Rachel Reeves in delivering her first Budget has outlined some hard-hitting measures in order to restore economic stability and rebuild public services.
David Chismon, Partner and Head of the Land and Rural Practice Group at Saffery, in giving an immediate response to today’s Budget announcement, said:
“On the one hand it has not been as bad as the rural sector might have expected, but still delivers a number of challenges that will make farming for food and for the environment increasingly difficult to deliver down the generations.
“Perhaps the biggest announcement for the rural sector related to Agricultural Property Relief (APR) and Business Property Relief (BPR) for inheritance tax (IHT). Today’s announcement sets a £1 million cap to the 100% rate of relief on the combined value of both business and agricultural assets. Over this cap IHT will apply, but with 50% relief, thereby resulting in an effective tax rate of 20%. These measures will take effect from 6 April 2026 and will apply not only to charges on death but lifetime transfers into trusts or to individuals, in addition to decennial and other charges for relevant property trusts. Anti-forestalling rules have been put in place such that the new rules will take effect from 30 October 2024. It’s likely that these changes to IHT reliefs overall will impact a large number of landed estates, smaller farming units and rural businesses.”
Continuing on the theme of APR, Peter Harker, Partner and Head of Natural Capital at Saffery, noted the Chancellor’s position on APR and land managed under environmental schemes. He said:
“The Chancellor has today confirmed the extension of APR to land managed under certain approved environmental schemes from April 2025. However, the impact of the £1 million cap taking effect from April 2026 will reduce the effect of this measure.”
David Chismon went on to note that: “The increase in the higher rate of capital gains tax (CGT) on non-residential property to 24% was trailed in advance of the Budget, so will not have come as a surprise to many taxpayers. This will increase the tax charge on sales of land and shareholdings with effect from 30 October 2024.”
He said also: “Rises in the National Living Wage and Minimum Wage will affect the viability of some small rural businesses, as will the increase in employer National Insurance from 13.8% to 15% coupled with the lowering of the threshold at which employers will pay it to £5,000 from £9,100, although this will be offset by employers being able to claim back an increased amount from their NI bill of up to £10,500 in respect of the employment allowance.
“The discount on business rates, currently 75% and due to end in April 2025, will be replaced by a 40% discount which will still see the rates of many businesses nearly double. Again, this may present challenges for rural businesses.
“Many family farms and rural businesses are asset rich in terms of land and property but cash poor, and will be considering their options and tax exposure in light of the changes announced.”
