The Budget For Farmers: A Balanced Approach?
5th November 2024
In her first Budget, Rachel Reeves moved quickly over two key capital taxes for farmers. Although, I’m sure it won’t have escaped their attention.
Capital Gains Tax (CGT)
The rate of CGT paid on the disposal of assets rises from 10% and 20% for basic and higher rate tax payers respectively, to 18% and 24% bringing the rates in line with those used for individuals disposing of residential property. Whilst an increase was anticipated, many had predicted that CGT rates could be aligned to Income Tax rates of 20% and 40%, so perhaps not as bad as first imagined. This rate change takes affect immediately to any disposals made on or after 30th October 2024. Contracts entered into before 30th October (i.e. where contracts have been exchanged) but that were not yet completed fall under special provisions which allow them to be taxed at the old rates, so long as they were not entered into with the purpose of obtaining a tax advantage.
Agricultural Property Relief (APR), Business Property Relief (BPR) & Employers National Insurance
The big change, of course, was the significant reform in APR and BPR from April 2026, which effectively taxes all agricultural or business assets above £1million passed down on death at 20%. Rachel Reeves noted that this will exclude and therefore help the smallest farmers, which it will, but with the rate being set at £1million, and average UK farmland valued at approximately £10,000 an acre, it really is only going to help the very smallest farmers.
Couple this with the increase in Employers National Insurance (increased to 15%) if your farming business is fortunate enough to sustain employees, the fact that they have also taken away the Inheritance Tax (IHT) benefits on pensions passed down on death, and that the farming budget has been frozen and this budget has been a hammer blow for farmers.
Our Thoughts
The cynic in me cannot help but wonder, in a time where 68% of the farming population is over 55 (and 38% is over 65), at the timing of this measure. Perhaps we will see a return to more gifts during lifetime and more holdover claims which have pretty much become non-existent in the recent past, but with many of the next generation not interested in farming this creates a real issue.
Time will tell as to whether this measure will make it easier for new entrants to enter the industry, capitalising on those selling land to pay Inheritance Tax, or whether this land will simply be bought up by larger more industrial farms or hopeful developers.
One thing is sure, you don’t need many acres to be above the new £1million limit. That’s before we even consider machinery which can be pretty valuable in its own right. The changes will affect a lot of farming families and a lot of their IHT planning.
Get In Touch
If you are looking for help and advice on the Budget for Farmers, please do contact your local Whitings LLP office and our teams will be happy to help you.
