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NewsYesterday the Chancellor announced the long-awaited Budget, along with the Spending Review which sets out the government’s spending for the next few years and allocates funding to government departments.
There are several announcements that will have a significant impact upon farmers and the rural economy, and we have attempted to provide a summary of the most pertinent points.
Inheritance Tax
Perhaps the biggest announcement affecting landowners is the reform of Agricultural Property Relief and Business Property Relief. Despite the freeze to the IHT threshold for another two years to 2030, meaning an allowance of up to 1 million pounds, the changes to APR and BPR could be incredibly detrimental. From April 2026, the first £1 million of combined business and agricultural assets will not be liable to any inheritance tax, but for assets over £1 million inheritance tax will apply with 50% relief, at an effective rate of 20%.
National Insurance
For those farmers and rural businesses that employ staff, the increase in Employers’ National Insurance contributions will rise from 13.8% to 15%. Moreover, the threshold at which they have to pay it will drop from £9,100 to £5000, however the employment allowance (which allows companies to reduce their NI liability) will increase from £5000 to £10,500.
National Minimum Wage
Furthermore, the minimum wage for people 21 and over will rise by 6.7% from £11.44 an hour to £12.21. For people aged 18-20 it will rise from £8.60 to £10 and for apprentices, it will rise from £6.40 to £7.55.
Capital Gains Tax
Although not as drastic as some feared, Capital Gains Tax will increase. For higher rate tax payers, on assets like shares it will go up from 20% to 24%. For lower rate tax payers, it will rise from 10% to 18%. However on residential property, the rates will remain at 24% and 18%.
Stamp Duty
The government will increase the stamp duty land surcharge for second-homes, by 2% to 5% from today.
Fuel
The 5p cut in fuel duty on petrol and diesel introduced under the Conservative government was due to end in April 2025, but will be kept for another year.
Environmental Land Management Schemes
The government has committed to continuing to develop the schemes, so that they work for farmers and nature.
It’s been announced that when the Countryside Stewardship Higher Tier opens, it will have a rolling application window. Moreover, we now know that more information about timing and content of the expanded Higher Tier scheme will be published in December.
Additionally, farmers with expiring HLS or Higher Tier agri-environment agreements this year will be offered an extension to their existing agreement.
Delinked Payments
There are further, perhaps more dramatic than envisaged, reductions to delinked payments for next year.
The fastest subsidy reductions will apply to those who historically received the largest payments. As an example, the top 4% of recipients (who received over £100,000 in subsides in 2020), will receive no more than £7,200 by 2025. However, those who began with less than £10,000 in payments will see a more gradual reduction.
For 2025, the government plans to apply a 76% reduction to the first £30,000 of a payment and no payments will be given for any portion above £30,000. For examples, for a payment of £40,000, there would be a 76% reduction applied to the first £30,000 of the payment, equalling a £22,800 reduction. Then a 100% reduction would apply to the next £10,000 and so the overall payment would be reduced by a total of £32,800 to £7,200.
And finally…
Draught Alcohol
Perhaps the most positive news to come out of yesterdays budget was that the tax on draught drinks will be cut by 1.7%. It’s fair to say that we could all do with a pint or two to digest the rest of the budget implications.
Overall, this has not been a particularly positive budget for farmers and rural businesses. If you have questions, queries or concerns, please don’t hesitate to reach out to the BTF Partnership team, we’d be more than happy to help.