Gearing up in a challenging legislative environment for the rural sector

As winter is coming to a close, before we greet a new spring, we look back at what has been a challenging year for the rural sector.

Farmers are well-versed in dealing with uncertainty in relation to input costs, commodity prices, shortages in the labour market, climate change, and ever more challenging weather patterns. But one of the biggest challenges to the family business’ ongoing success, growth, and sustainability was presented by the proposed change to the Inheritance Tax (IHT) and the associated tax relief rules.

The proposal has been at the forefront of many discussions and stirred stress and anxiety within the sector over the last 18 months following the October 2024 Budget Statement. As is well-known by now, the original proposals were to restrict the availability of Agricultural and Business Property Relief at 100% to the first £1 million of qualifying assets held, with any balance of such assets to be taxed at an effective rate of 20% for IHT.

Since then, improvements were announced to the position in the November 2025 Budget Statement and in December 2025, resulting in an increase of the available tax reliefs to the first £2.5 million of qualifying assets and confirmation that the allowances will be transferable between spouses. These latter changes will improve the position for a number of businesses but do not take away the need for detailed and considered succession planning to ensure the ongoing viability and financial strength of these family businesses. The legislation is not yet in its final form, with ongoing changes to the draft Bill being made, including to those provisions applying to interests in agricultural tenancies.

Almost in the background, the Land Reform (Scotland) Act 2025 received its Royal Assent in December 2025. Aiming to regulate large landholdings in Scotland and certain types of leases, this legislation will have far-reaching effects on many of those active in the rural sector.

Additionally, there remains uncertainly on the final position of agricultural support payments, with a phasing in of the new regime over the next couple of years.

As with any business, in order to plan for the future, whether that relates to planting decisions or transfers of ownership to the next generation, a level of certainty is needed to allow considered decisions to be made for future success and for ongoing economic growth.

With an ever more complex legislative background, it has become more important than ever to seek advice from your professional advisors.

At Shepherd and Wedderburn we are lucky to benefit from the knowledge and experience of our expert team to guide our clients into 2026 and beyond, and we look forward to working together to support their ambitions for growth.

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