Many farmers around the country are reeling from the news announced in the Budget of changes to inheritance tax for farms. But these are not the only challenges facing the rural sector following the Budget.
Thrings Partner Samantha Doherty runs through what you need to know about the changes most significant to agriculture.
Inheritance tax and Agricultural Property Relief
Whilst the current freeze on inheritance tax (IHT) Nil Rate Bands is extended for a further two years to 2030, farming’s longstanding agricultural property relief and business property relief on IHT was slashed in the budget.
This means that from April 2026, only the first £1million of any farming estate or business receives the 100% relief. Any qualifying assets over that threshold will be subject to a 50% relief - an effective rate of 20%.
The existing nil-rate bands remains tax-free for the first £325,000, rising to £500,000 if the estate includes a residence passed to direct descendants, and £1million when a tax-free allowance is passed to a surviving spouse or civil partner. So, dependant on circumstances, farming estates and businesses worth less than £2million can still receive 100% exemption.
Capital Gains Tax
Capital Gains Tax (CGT), the tax on the profit when you sell an asset that has increased in value, increased from the day of the Budget, with both the lower rate rising from 10% to 18%, and the higher rate from 20% to 24%. On residential property, meanwhile, the rates will remain at 18% and 24%.
National Insurance
National Insurance contributions for employers is set to rise from 13.8% to 15%, with the threshold at which they have to pay dropping from £9,100 to £5,000. Employment allowance meanwhile will increase from £5,000 to £10,500.
Minimum wage
Unveiled shortly before the Budget announcement, the National Minimum Wage is set to rise next April by 6.7% for people aged 21 and over – from £11.44 an hour to £12.21.
Meanwhile those aged between 18-20 will see a rise from £8.60 to £10, with apprentices seeing their hourly pay increasing from £6.40 to £7.55.
As such, any farms employing staff currently on minimum wage or working as apprentices will need to ensure salaries meet these national requirements.
Samantha Doherty, Partner in the Thrings Private Client team, said: “It was unclear how rural landowners could be impacted by the Budget given the relatively little reference to agriculture in the Labour election manifesto but, following announcement, it is clear the sector is set to face a squeeze.
“The changes to inheritance tax are likely to be a particularly hard blow to family-owned farms where the business is handed down from generation to generation. For many, this could mean disposing of land in order to meet the costs, and if the landowner has to sell up, it could also mean the loss of any tenant farmers.
“Succession planning is more important now than ever if farmers are to ensure the next generation is able to take over a viable business that isn’t hamstrung by the financial burden of inheritance tax. By exploring a number of possible avenues, including gifting land and assets, it can help to avoid leaving them with unnecessary costs.”
Whether it is a family business, land or private wealth, Thrings’ Private Client lawyers are dedicated to forging lasting relationships with their clients which ensures full insight into the needs they have. Get in contact to find out how they can help you plan for your future.
