Budget 2024 - Is the sun setting on farming?

The following is my take on the key issues affecting the agricultural sector from today's budget.

Chancellor Rachel Reeves insisted that the announcements in her Budget today “protected working people every single time”. However, her decision to scrap the availability of Agricultural Property Relief (APR) and Business Property Relief (BPR) on farms worth over ￡1 million makes a mockery of that statement.

Farmers are arguably some of the hardest-working people in the country, yet even those inheriting small farming businesses will now be liable for Inheritance Tax bills that could threaten the viability of those businesses.

Ms Reeves said the ￡1 million threshold will protect family farms. But, given the value of rural property - farmland is now often worth well over ￡10,000/acre - very few farms will actually be safe. Keir Starmer says he is committed to the agricultural industry and boosting food security. This raid on APR won’t fill family farms with the confidence that he really means it.

There has been a lot of comment on social media that this is the death knell for family farming in the UK and all part of a WEF plan to asset strip the industry so the likes of Black Rock and Bill Gates can buy up farmland for peanuts while the rest of eat bugs or fake meat. That is hyperbole. As ever, farming will survive, but it could be damaging for many businesses. Farmers now need to take urgent advice on how best to structure their businesses given they can no longer rely on APR to safely pass their life's work onto the next generation. There will be no shortage of work for accountants!

Below are all the things I picked out from the Budget relevant to the farming industry.

APR assault

As feared, Chancellor Rachel Reeves made drastic changes to Agricultural Property Relief (APR) and Business Property Relief (BPR) in today’s Budget. From April 2026, the first ￡1 million of the value of agricultural properties will be exempt from Inheritance Tax (IHT), but above that threshold, the combined relief available from APR and BPR will drop to 50% of the standard 40% rate of IHT. This means death duties of 20% will effectively apply on the value of farms and rural estates above ￡1 million.

However, the Chancellor did confirm that APR will be available on certain environmental land management agreements from 6 April 2025.

Other tax rises

·?????The rate of employers’ National Insurance contributions will rise from 13.8% to 15% from April 2025. The threshold at which they kick in will also drop from ￡9,100 to ￡5,000. However, the Employment Allowance available to smaller businesses will increase from ￡5,000 to ￡10,500.

·?????The lower rate of Capital Gains Tax on the profits from selling assets like second homes will rise from 10% to 18%. The higher rate will rise from 20% to 24%.

·?????The Stamp Duty Land Tax surcharge on the purchase of second homes will increase to 5% from tomorrow (31 October).

·?????VAT on school fees will be applied from January 2025.

·?????IHT thresholds will be frozen until 2030. IHT will also be applied to inherited pensions.

·?????The current 75% business rates relief for hospitality businesses will drop to 40% from 31 March 2025. The relief, capped at ￡110,000 per business, will be in place until the end of 2026.

Minimum wage hike

Those aged 21 or over on the minimum wage will see their salaries hiked by 6.7% to ￡12.21/hour from April next year. As part of the government’s move towards a single adult rate, 18 to 20-year-olds will see their pay packets rise by 16% from a minimum of ￡8.60 to ￡10/hour. Apprentices will enjoy a hike from ￡6.40 to ￡7.55/hour.

Defra budget

Defra’s annual budget will remain at ￡2.4 billion. Although this is better than a reduction, it is effectively a cut in real terms when inflation is taken into account. It is also a snub to organisations like the NFU that have been calling for a significant increase in funding to help farmers deliver more nature restoration and carbon mitigation measures.

Carbon border tax

The government has confirmed that a UK carbon border adjustment mechanism will be introduced on 1 January 2027. This will place a carbon price on some of the most emissions-intensive industrial goods imported to the UK including fertiliser. This could increase the costs to farmers.

Nutrient mitigation

￡45 million of extra funding for seven areas was announced as part of the second funding round from the ￡110 million Local Nutrient Mitigation Fund (LNMF). This supports local planning authorities to bring forward nutrient mitigation schemes and progress stalled housing development.

Some good news

There were a few glimmers of good news amongst the gloom. The freeze on fuel duty will remain in place next year, said Ms Reeves. In a surprise move, she also announced that she would not extend the current freeze on income tax thresholds imposed by the previous government. From 2028/2029 the thresholds will rise again in line with inflation. The company car tax exemptions for EVs will also continue. Duty on draft beers and ciders will fall by 1p/pint.