Update for the rural sector

Following the recent Budget announcements, our specialist agriculture accountants will be hosting a webinar specifically tailored for the rural sector. Our team of experts will break down the key highlights and discuss their implications, providing you with practical advice on how to plan ahead.

In the meantime, we invite you to read an update from our head of agriculture, Brian Harvey, who shares his thoughts on the latest announcements and what they mean for our community.

Last week was half term for many. I thought it was a good opportunity to spend a few days with the family queuing for thrill-seeking rides at Thorpe Park.

It was whilst part of a very large queue that I tried to watch the Budget. I was able to pick up enough to hear that there were fundamental changes to the inheritance tax (IHT) rules that would have a material impact on the vast majority of our agricultural and landed estate clients.

I have for many years, when responding to what have often been benign Budgets, often commented that that I was thankful that the IHT rules had not been tinkered with.

Recognising that trading businesses can qualify for up to 100% relief from IHT, with business property relief (BPR) and property occupied for the purposes of agriculture qualifying for up to 100% agricultural property relief (APR), our advice has been provided with these rules at the heart. This ensures working family farms can be passed down to the next generation without a crippling tax bill.

Nothing lasts forever. It was incredibly disappointing to hear in the Budget that the Government is driving ahead with plans to reduce IHT reliefs for businesses from April 2026. This change could have potential implications for many family farm businesses.

The measures announced in Rachel Reeves’s first Budget mean:

• From April 2026, the reliefs will be subject to a combined cap of £1m for 100% relief per estate with the £1m allowance not being transferable between spouses
• The implication being that value over £1m will only benefit from 50% relief, effectively a 20% tax charge on businesses and agricultural property values in excess of £1m
• This effective £1m cap is far lower than expected and appears to be without any consultation with the key players in the industry, which is very frustrating.

Whilst the Government might suggest this will not impact over 70% of farms, I personally struggle to see how this will be the case. I am convinced that the impact on the agricultural and landed estate sector and family businesses will be huge, noting that the Country Land and Business Association (CLA) has estimated the changes will impact 70,000 farms in the UK.

I am not sure where all of the numbers have come from, but looking at the types of farm businesses that we act for there are very many that on the face of it will fall into the scope of IHT where previously they would not have. Ultimately, the only potential IHT bill you have an interest in is your own!

Example:

For a 500-acre farm, the annual cost of funding the IHT bill on death over the following 10 years would be approximately £120,000 a year. Therefore, the farming business would need to earn post-tax profits of at least £120,000 a year to afford this. Quite an ask!

No matter how much the annual tax burden is over 10 years, this will clearly impact on the ability to invest in the business over that period and therefore is damaging to economic growth and could see assets sold, which for some will call into question the viability of the farm business.

You will no doubt be aware that industry bodies are lobbying Government on the proposed tax changes. We support their work and will contribute through the various rural accountancy bodies we work with.

We will play our part in lobbying Government to ensure they are aware of the negative impact these measures would have on the rural economy – reduced growth, reduced investment in businesses and a reduction in UK food production, alongside the likely negative impact on the environment.

However, whilst the industry will push hard and hopefully some compromise can be found, we do not suggest you simply hope the Government will back track. The important thing now is not to panic, to keep calm and carry on. As the dust settles, we will need to work together to ensure a sensible plan is drawn up and implemented.

There is a lot to think about, with many questions to ask and rightly some real anxiety for the sector.

What can you do?

• Work as a family, discuss your plans openly where possible and consider what you all want to achieve and agree what is possible
• Working with trusted advisers will be key here too and whilst we are conscious the fees incurred to do this properly will be a frustration, the reality is that getting solid advice at this time will be as critical now as it has ever been

We are here to help our clients. We will:

• Provide regular updates, including a webinar
• Communicate with you and, on the basis that many will want to review your position, we will be happy to engage to deliver this advice
• We will balance the need to react swiftly where matters are time sensitive and where anxiety among our clients is high against the need to get the full detail of the changes before making decisions
  Work with both the legal and valuation professions to make sure we can help you navigate this difficult time as best as possible

There will be many clients wanting advice and we will work in as organised a manner as we possibly can, as all our clients’ affairs are equally important to us. We expect there will be much to do, and we will be looking at those cases in particular where there is a significant increase in risk, for example because of the age of the business owner, to make sure we do our best for all of you.

It is important to note that for many, but sadly not all, there will be options that will help. We are internally focusing on putting together our thoughts on a range of solutions that will be discussed and presented to mitigate some and ideally all of the risk of the extra taxes the Budget would otherwise impose, particularly when looking at IHT.

We are here to do our best for our clients and we will look to do just that.