The long-awaited budget was announced in October, with a view to raising income via taxes of some £40 billion.

The budget itself was comprehensive, but how will the budget actually affect you as farmers, landowners and rural businesses? The aim of this article is to highlight those changes that impact upon you.

Inheritance Tax

The most significant announcement of the Budget relates to changes to Inheritance Tax (IHT) reliefs.

It was announced that Agricultural Property Relief (APR) and Business Property Relief (BPR) are to be reformed, with those changes coming into force on the 6^th April 2026.

Currently, 100% BPR and APR relief is available for qualifying assets. The 100% rate of relief will continue, but only for the first £1 million of combined agricultural and business property assets. For any qualifying assets owned over £1m, the rate of relief will only be 50% and any assets will thereafter will be taxed at the usual 40% rate.

APR will be extended to land managed under an environmental agreement from 6^th April 2025, which extends the scope of APR from its current position.

Existing IHT thresholds known as nil rate bands and exemptions will continue, to include the residence nil rate band and the spousal and civil partner exemption, for any assets left to a surviving spouse or civil partner and the charity exemption. Estates will be able to benefit from these in addition to the reformed APR and BPR relief.

The current IHT nil-rate band afforded to everyone will be frozen at £325,000.00 for a further two years until 2030.

These are of course significant changes and we will be analysing these closely over the coming weeks and months and will be updating you further as to how the reforms will affect farmers, rural landowners and rural businesses.

Capital Gains Tax

It was widely anticipated that Capital Gains Tax (CGT) would increase. These increases came into effect immediately from the 30^th October 2024.

CGT is chargeable when assets are disposed of and affects individuals, trustees and personal representatives. The annual exempt amount will remain.

The lower CGT rate has increased from 10% to 18%. The higher CGT rate has increased from 20% to 24%. The rate for personal representatives and trustees has also increased from 20% to 24%.

Previously, there were differing rates for residential property, however these rates will remain at 18% and 24% respectively.

Business Asset Disposal Relief

Business Asset Disposal Relief (BADR) formerly known as Entrepreneurs’ Relief will remain, however the rates will change.

The changes will result in you paying CGT on qualifying assets disposed of at the rate of 14% from the 6^th April 2025, rising to 18% from 6^th April 2026. This will bring the rates into line with other CGT rates detailed above.

National Insurance

Employer’s National Insurance (NI) contributions, known as Secondary Class 1 NI contributions, will increase from 13.8% to 15% from the 6th April 2025.

The threshold at which employers start paying NI on an employee’s salary will reduce from £9,100.00 to £5,000.00 a year.

Hand in hand with this, the employment allowance has been increased from £5,000.00 to £10,500 per employee and the present employment allowance of £100,000.00 eligibility threshold will be removed.

These changes had been anticipated and it is expected that the increased employment allowance for small and medium size employers may offset the increase in contributions.

Employee’s national insurance contributions will not change.

Corporation Tax

No change for corporate taxes. The main rate will remain at 25% and the small profits rate at 19%.

Stamp Duty Land Tax (SDLT)  *(England and Northern Ireland only)*

The higher rates tax surcharge for additional dwellings is being raised from 3% to 5%. This will apply to the purchase of any second homes, buy-to-let properties and properties purchased by companies. This came into effect immediately from the 31^st October 2024.

Land Transaction Tax (LTT), the equivalent regime in Wales, has been devolved to the Welsh Government. The changes therefore will only apply to England and Northern Ireland.

Fuel Duty

Fuel Duty will be frozen and contrary to what was anticipated, the temporary fuel duty cut of 5p per litre will remain for a further year, providing welcome relief to rural individuals and businesses alike.

 

National Living Wage

From the 6^th April 2025, the National Living Wage will increase from £11.44 per hour to £12.21 per hour, an increase of 6.7%.

The National Minimum Wage, applicable to those aged between 18 and 20 will go up from £8.60 to £10.00 per hour. The apprentice rate has increased from £6.40 per hour to £7.55 per hour. The rates for 16 and 17 year olds has yet to be set.

Income Tax

Income tax personal allowance threshold freeze will come to and end in the 2028/2029 tax year and will continue to be uprated in line with inflation.

Conclusion

There are significant changes facing rural landowners, farmers and businesses following the Budget, which will naturally be of concern to individuals and businesses alike. We will be analysing and monitoring these changes carefully over the coming weeks and further updates as to the changes will be shared with you in due course.

If you wish to discuss any of the above or have any concerns, then please do not hesitate to contact us.