A change of season – and another budget on the horizon

This article was originally published in the Press & Journal.

As we come to the end of another dry summer with a resulting early harvest, the rural sector is also moving into a new fiscal season. I remember a time when the Budget did not loom large in the farming calendar. That all changed in October 2024, when the Chancellor’s Budget Statement announced far-reaching and rather unexpected changes to Inheritance Tax (IHT) and the available tax reliefs under Agricultural and Business Property Relief. The new IHT rules are now fully in force, although we still await further detail on several provisions. As a general rule, reliefs have now been restricted to £2.5 million of qualifying assets per person.

Budget Day is now firmly in mind for everyone active in the rural sector.

Succession planning is no longer optional: it’s important for all businesses of all sizes to decide whether they need to take action to mitigate exposure to IHT. This will involve establishing the valuation of relevant assets and deciding how best to pass them on to the next generation. It has become clear over the last couple of years that lifetime gifting and life insurance cover have a role to play, among other tools. All will need careful consideration.

Each family works under its own unique set of conditions. Ownership structures, financial security and long-term goals can all vary greatly – and all will need to be taken into account. A balance must also be struck between the need to plan for succession and the protection of an older generation who in many cases remain heavily reliant on the income and shelter that those business assets provide.

Next April, the new rules on the taxation under IHT of pensions will also come into force. The proposal is essentially for unused pension pots to be subject to IHT on death, along with a deceased’s other assets. Those changes will bring particular challenges for people with pension trusts that hold farm assets that do not qualify for any Agricultural or Property Relief under the proposed new rules. They will need to carefully consider the future of this set-up.

As for the upcoming Autumn Budget, it is difficult to know what to expect. Many commentators have suggested that we might see changes to Capital Gains Tax (CGT), possibly in the form of a rate increase. At present, holdover relief for CGT is still available, providing a lifeline for many as it avoids an immediate CGT charge on lifetime gifts. A change to this could make planning much more challenging.

For both farmers and professionals alike, it’s difficult to decide what is the right thing to do. The last couple of years – with unexpected changes in October 2024, November 2025 and December 2025 – have reminded us how unpredictable the future can be. More than anything, the sector now requires a period of stability, with a taxation background that allows and supports long-term planning. The sector cannot thrive if it is living from one Budget to the next, never being able to invest in the future.

Finally, it’s important to remember that while taxation plays a role in decision-making, it’s only one of many factors to consider when planning for the future of a farming business. Careful discussion, with the benefit of relevant professional advice, is needed to achieve the best possible outcomes.

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