The inheritance tax (IHT) changes and reductions in agricultural and business property relief (APR and BPR) will be costly to many farms and rural businesses, according to secretary and adviser to the Central Association of Agricultural Valuers (CAAV), Jeremy Moody.
Moody also argued that the government’s apparent reasoning used to justify the aforementioned budgetary changes appears to based on “misunderstood and partial data”.
“The Budget lacks significant measures to stimulate growth through entrepreneurship, relying heavily on taking taxes from businesses, and distinctively farming and the food chain, rather than fostering an environment which supports innovation, business expansion and the rural economy.
“Instead, we have more tax levied in destructive ways and higher interest rates in bond markets, where we depend on the kindness of strangers.
“At a strategic level, the Government may have missed its optimum moment to drive the economic growth programme we need.
“These changes will affect many more family farms than the Government suggests and will do so when farming needs its resources to meet the new policies, to invest and adapt to advancing climate change,” Moody said.
CAAV
CAAV is a specialist professional body representing, qualifying and briefing 3,000 members practicing in a diverse range of agricultural and rural work throughout England, Wales, Scotland and Northern Ireland.
The government has announced that from April 2026, APR and BPR rules will be changed, resulting in a 100% relief on the first £1 million of assets and then 50% relief on assets after that, equating to an effective tax rate of 20%.
In simple terms, where land, dwellings, machinery, animals and other assets are worth in excess of £1 million, there will be a £200,000 tax levy owed.
“That is a lot to pay, even if its spread over 10 years that is as much as many farms make in profit over 10 years, precluding important investment,” Moody said.
He also contested the governments changes to legislation relating to holiday lets, a popular means of farm diversification, which will now be treated on the same basis as residential lettings, as opposed to an extension of the farm business, Moody claimed.
CAAV maintained that the government argues that only a quarter of farms- the wealthiest quarter, will be affected by these budgetary changes, and that the existing tax data contradicts this argument.
Firstly, the organisation said this is only based on APR claims which understates the effects, and takes no account of the farm’s machinery, livestock, working capital or other business assets, which include diversified business activities that support the farm and the rural economy.
Secondly, CAAV claimed it is not an assessment of farms, but rather of private possession of agricultural land.
“If farmland has to be sold, the increased capital gains tax rate will mean more acres must go, reducing the farm’s production capacity and its ability to meet its overheads,” Moody warned.
The focal point of the Budget, in CAAV’s opinion, was the£25 billion increase in employers’ National Insurance, which in turn, increases the cost of employing staff, especially lower paid and part-time workers.
“The whole food chain will now be less able to invest and take on new hires, with anyone earning even £9,100 costing at least £615 more, this will be particularly felt in many of the labour-intensive sectors of farming like dairy, pigs, poultry fruit, vegetables and horticulture,” he said.
Despite these complaints, Moody welcomed the funding boost to the biosecurity facilities at Weybridge, given the growing disease threats the UK faces, as well as the decision to implement the last government’s proposed extension of APR to farmland in environmental agreements with public authorities.
“However, those benefits do not relieve the large losses to farming from the headline changes,” he said.
