Rachel Reeves delivered her first Budget as Chancellor of the Exchequer on 30 October 2024.
The Autumn Budget 2024 is hugely significant for the agricultural sector. Farmers are often asset rich but cash poor, meaning in the absence of inheritance tax (IHT) reliefs the next generation would have to break up their farm to meet IHT liabilities. This would then threaten a reduction in available land for food production and so ultimately potentially have an impact on food prices. A number of changes in the Autumn budget negatively affect the farming sector.
The changes create much uncertainty for farming families at a time when Defra is set to accelerate the tail-off of direct payments for the largest recipients – and set the reduction on the first £30,000 of all payments at 76% for next year, with 100% reduction beyond that.
The importance of inheritance tax reliefs for farmers
Agricultural reliefs ensured that farmers had the ability to pass farms on to their children, the continuity of farming knowledge and experience, so giving the nation the food security we all rely on.
In 2023, Sir Keir pledged to have “a new relationship with the countryside and farmers”. There were promises to provide “certainty” and “work with farmers”, insisting that he agreed “food security is national security”. In Jeremy Clarkson’s words, “farmers have been shafted”!
Many farms in this country are family farms, now at risk of being broken up and unable to remain sustainable with reduced land areas, cashflow under pressure to pay IHT charges over a 10 year period, and therefore people will not be able to afford to stay in farming.
Overview of Inheritance Tax Changes
Agricultural Property Relief (APR) and Business Property Reliefv (BPR) will be reformed. From April 2026, the first £1 million of combined eligible agricultural and business assets attract 100% relief. The rate of relief on excess assets will be 50%.
Changes to APR mean that, from April 2026, inheritance tax will apply at an effective rate of 20% (compared to the standard rate of 40%) on all farm assets beyond a £1m threshold.
Implications for Farmers
A £1 million farm would only be about 100 acres in most UK areas, which is not a viable business proposition in today’s world. The £1 million cap is not applied to the value of land only; combined with BPR, the exemption will be used quite quickly, as it also includes livestock, farmhouses, barns, plants and machinery.
Farmers may be forced to sell land, reducing their operational area for production, revenues depleted and insufficient profits to reinvest in the business.
It is important that farmers have an understanding of the new thresholds and exemptions
Farm Succession is now in the spotlight. We can only emphasise the need for farmers to plan the passing their farms to the next generation without incurring crippling tax burdens.
Review your estate, fully understand who has legal ownership, identify which assets are sat in your balance sheet, revisit your partnership agreements and wills to align with new tax regulations.
Seek professional advice to optimise tax efficiency and ensure compliance.
In Conclusion
We are still absorbing the detail behind the Budget announcement; it will be important to stay informed about the changes and actively manage the inheritance tax implications.
There is a real danger in politicians forgetting the importance of farmers and food security, their lack understanding of the lives of people in rural areas and, therefore, introducing changes in policy which have unintended, negative consequences.
We would encourage farmers to sit round the kitchen table and engage in discussions with their families and advisors to prepare for the future.
What are thoughts or experiences regarding inheritance tax? How are people planning to address the changes?
Contact Us
If you’re a farmer or work in the agricultural industry, succession planning for your farm is going to become a vital task. Its important to emphasize the potential tax burdens that will be put on your farm if valued over the £1 million threshold is something that needs to be carefully taken into account. If you would like some help on how to understanding your farm’s value and the tax burdens you are now likely to face and also to help you pass your farm to the next generation contact Moore (South) today.