Autumn Budget 2024 in review – What farmers and landowners should be considering now

As part of a series of articles analysing the government’s Autumn Budget, our land, estates, and rural business specialists look in more detail at the measures that will impact on our agricultural sector and rural communities.

Authored by:

• Joseph Mitchell – Head of our land, estates and rural business team and agricultural litigator
• Jan Wright – Agricultural and estates specialist for wills, trusts and probate
• Lucy Beachell – Agricultural and rural property transactional solicitor

The measures announced in the recent autumn budget have some significant ramifications for farmers and landowners with changes to a number of tax reliefs scheduled to come in as early as April 2025, as well as a number of other financial and employment related changes.

However, it’s imperative that the agricultural sector begin to speak to their professional advisors now to get the advice that’s right for them and to ensure they are planning as best as possible before rushing into any decisions.

Changes to agricultural property relief and business property relief

Agricultural Property Relief (APR) and Business Property Relief (BPR) are inheritance tax reliefs available on eligible business and agricultural assets. The reliefs are available for individuals and trustees. APR and BPR can be applied when assets are transferred on death or when assets are given to individuals or given to/from trustees, where an inheritance tax charge would otherwise arise.

There are various factors which are considered when determining how much relief is granted, but currently APR and BPR can reduce the inheritance tax liability by up to 100%.

However, in the budget announcement on 30 October 2024, the government announced it will reform APR and BPR from 6 April 2026. In summary, from 6 April 2026, only the first £1million of assets which qualify for 100% relief under the current rules, whether APR or BPR, will continue to qualify for relief at 100% of their relievable value.

After the first £1million, the relief (combined) will be capped at 50%. This allowance will not, according to the proposals as published, be transferable between spouses. It should be noted, however, that any assets which currently qualify for 50% relief under the current rules will be unaffected by the proposed changes.

What impact or the changes likely to have on rural businesses?

The new financial cap on APR and BPR will increase the inheritance tax liability substantially for many agricultural business owners. Thinking about a traditional family farm example, a lot of farmers are asset-rich and cash poor meaning they rely upon the reliefs in order to pass down their businesses to the next generation without the requirement for land, machinery, or stock to be sold to pay the tax bill.

When taking into account the value of the land, machinery, buildings, live and dead stock and any cash in the bank, it’s easy to see how even a small viable family farm could be impacted by these changes.

If the government continue to insist that the new capped allowance is not transferable, farming couples may need to take steps to change the ownership of their assets and the structure of their wills to make sure that the farm can qualify for the maximum allowances available.

Wider challenges for the rural sector

Many experts have identified that the impact of the autumn budget has been significantly heightened due to the already challenging circumstances the sector is also having to face, just a few of these examples include:

• From 2025, the maximum amount of money any farmer can receive from BPS (now de-linked payments) is £7,200 for the year. When you factor in that some farmers in 2020 were receiving more than £40,000 for the year – the figures speak for themselves.
• From 5 April 2025 double cab pick-ups traditionally classed as ‘goods vehicles’ for tax purposes will be treated as company cars for tax purposes which will bring an increased tax liability.
• The increase in National Minimum Wage coupled with an employer’s obligation to pay increased National Insurance contributions (NICs)
• Introduction of the new Water (Special Measures) Bill to clean up waterways – the agricultural sector has for a long time been under the spotlight in respect of pollution causes and levels in our rivers and water courses and as well as the big water companies, the government and general public are looking to us to do our bit.

The next steps for farming businesses

As solicitors, we have already been approached by several clients asking us if they need to gift land or set up trusts due to tax implications arising from the budget.

Whilst this may end up being the right course of action for some, our first question to farmers and landowners will always be ‘Have you discussed this with your accountant / financial advisor / land agent to ensure this is the right thing to do for you and your business?’.

If the answer is no, then clients may have missed a potentially fundamental stage in the process of instructing us. As solicitors, we are not tax specialists or financial advisors, and this advice should always be sought first, especially when these changes are arising from a financial budget. We can assist in putting our clients in touch with the right team of professionals if our clients do not already have existing relationships

What are the possible legal issues to consider for farming families following the budget?

Whilst it’s always good practice to keep your legal arrangements under regular review, the proposed budget changes will likely prompt a review of your arrangements, including:

• Your wills
• Ownership of the farming assets, including land
• Reviewing/putting in place written partnership agreements
• Formalising casual grazing arrangements / leases
• Reviewing or considering any trusts

However, it’s important to note we won’t fully know how the proposed changes announced in the budget will apply until after they have been fully consulted on. That consultation won’t begin until the start of 2025. But it’s always better to be proactive and to start those conversations as early as possible, rather than doing nothing. Again, speak with your accountant first to avoid rushing into a decision that could have unforeseen tax implications down the line.

When it comes to instructing a solicitor, you need someone who understands your business, understands what’s trying to be achieved and who you and your other advisors can work with well. Communication is key.

How Harrison Drury can support you

Our established and accredited team is made up of a variety of experienced experts associated with the ALA and the CLA and who have been recognised for their expertise by leading legal publications like the Legal 500 and Chambers.

What really makes us stand out is that many of our people are directly involved with or connected to the agricultural sector and other rural communities, including dairy farming, beef farming, arable farming, equestrian, tenant farming, landowners, agricultural contractors, shooting and conservation. Just like you, we are starting to see some of the implications of these changes first hand.

It’s inevitable there are going to be some tough decisions and some tough times ahead for our sector and so we urge you to reach out and talk, not just for professional advice but for general support, as a sector, we are all in this together. In addition to the legal services we offer, we also have a fantastic network of support organisations and as a firm, we are incredibly proud to be doing what we can to help our farmers and landowners.

Here’s a brief re-cap on what we’d say to you at this stage:

1. If you haven’t already done so, get in touch with your accountant and land agent to discuss the budget and potential implications on you and your business.
2. Together, devise a plan of action for what needs to be addressed now and what may need to be considered for moving forward.
3. Engage with us, talk to us about your plans, what you already have in place and what might be missing or needed. We can then talk you through how we can help and the options available.
4. Keep your plan of action under review and keep proactively talking and engaging with all your advisors. With a lot still yet to be determined, planning needs to be fluid and reviewed often. Use the time you have now to be as proactive as possible as the concern is doing nothing or waiting to see if a change in direction will be announced could cause further implications down the line.

To learn more about our Land, Estates and Rural Business team and how we can assist you and your business from our offices and specialists across the region contact us on 01772 258321.