Perhaps the most positive thing which can be said about the Budget from a rural perspective, is that it could conceivably have been worse – several of the ideas which were floated into the pre-budget speculation have not reappeared, There is no change in the CGT uplift on death, which would have been a nightmare to administer, and there was no increase in the Income Tax higher rates. Similarly, some planning tools such as CGT holdover and rollover reliefs have not been withdrawn, nor has the IHT seven-year gift rule been extended, and there has been no significant change to the trust regime.

The Budget has not, however, been kind to the farming industry. Some of the changes will simply be shared with the wider business sector but, fortunately, in some ways the farming industry is still largely and uniquely dependent on the labour of its proprietors, so the hike in NIC rates and reduction in thresholds will not be as important as it is for other sectors. However, for those farms which do have paid labour it will be a big cost to swallow. It will also be problematic for incorporated businesses and for those who draw remuneration as a mixture of salary and dividends. The rise in the National Living Wage, another Budget “giveaway” funded wholly by the private sector, will also have some effect on profitability, either directly where staff are employed on low wages or indirectly because of the effect it can have on the whole wage structure. Similarly, the pension changes will affect everyone with a drawdown pension and, incidentally, will draw many more estates into IHT. This is estimated to increase the number of estates liable to IHT from 4% to 8% (according to The Times) – bearing in mind that each estate will have multiple beneficiaries, each of whom might suffer from the increased IHT charge, the change is probably not one that will go down well. Farms may be particularly affected here since many have used SIPPs to purchase farmland. The consultation documents are silent on whether or not assets within a pension fund might be eligible for APR, but it seems unlikely.

The real impact of the Budget will fall in the changes to capital taxes. Business Asset Disposal Relief has not been abolished as some feared, but the 10% rate will end in April 2025 and will then rise to 14% over the next two years, at which point it will align with the lower normal CGT rate. Bearing in mind that this only applies to the first £1m of gains, it may not be the most significant tax increase for many, with the maximum increase being £80,000 by 2026/7. The change in the rate applied to non-residential property will be more significant for the larger transactions. With effect from Budget Day, the tax will be aligned with the residential property rates at 18% and 24%. Practitioners will probably be aware of the large number of transactions which were going through in the run up to the Budget, with many contracts being exchanged shortly before midnight on 29 October. As a result and unsurprisingly, there are anti forestalling measures which will apply (for both ordinary disposals and BADR sales) where completion of a transaction takes place more than six months after exchange.

One side effect of all this is that rollover relief becomes more valuable as a result of the higher tax rates, which may help support land prices.

The single biggest blow to the industry is the restriction of Agricultural and Business Property Reliefs. Since 1992, most farms have been eligible for 100% IHT relief on eligible land, buildings, machinery and working capital. From April 2026, these 100% reliefs, taken in aggregate, will be capped at £1m, with any excess being relieved at 50% only (i.e. an effective IHT rate of 20%). Given that the average UK farm is some 200 acres, even a farm of this size might face a bill of £200,000, and a 1000 acre commercial unit could well be facing a bill of over £2m. Even if it is settled under the instalment option, it is hard to see how many units could even pay the interest on such an amount. Critics have for some time (and particularly prior to the Budget) been describing these reliefs as “loopholes” but this is a misnomer. These reliefs were intentionally created to preserve the family farm, which they will no longer be able to do. Perversely, the retired industrialist or lottery winner who buys a “lifestyle” farm will be unaffected whilst the struggling commercial unit may face an impossible burden.

For the rural practitioner, already struggling under the burden of MTD, basis period changes and the implications of the cash basis, there is now likely to be a stream of clients at the door in the near future asking for advice on succession planning under the new regime. Old plans from the 1990s will need to be dusted off and wills will need revision as a matter of urgency. Failure to provide bespoke advice to clients within a reasonable timescale could potentially become a PI matter, and the amounts at stake are significant.

Many years ago, my training Partner, who had practised through the 1960s and 70s confided that, in his experience, Labour governments were bad for the economy but good for accountants. For a generation of clients who have assuming that IHT isn’t something that need concern them, history may be about to repeat itself.