Budget Reforms Fuel Farming Controversy

Following the new Labour Government’s first budget, Business Property Relief (BPR) and Agricultural Property Relief (APR)reforms to Agricultural Property Relief (APR) and Business Property Relief (BPR) has sparked controversy within the Welsh farming community, fuelling further uncertainty for businesses already navigating uncertain economic conditions.

New Tax Rules for Larger Farms

The changes introduced mean that agricultural relief allowing land or pasture to be used to grow crops, or to rear animals, will be scrapped for farms worth more than £1m. For businesses or agricultural property, a 50% relief will now apply to those that exceed the £1m threshold.  And for those who these changes apply to, a new tax on combined business and agricultural assets has been introduced at an effective rate of 20% from April 2026, which is payable over a 10-year span. This regulation marks a departure from previous rulings, which granted larger farming estates more substantial relief regardless of their total value.

Family Farms at Risk

Agricultural relief has allowed family-owned farms to survive for generations without needing to sell land or property to cover inheritance tax bills, and while the UK government has said that 75% of farms will not be liable for IHT under new measures, the issue of affordability has many businesses considering their position in the rural community. Estimates suggest that 6,000 family farms across the UK are in danger of facing an increased tax burden. To remain within the threshold, they are having to resort to selling portions of their property. Farms under financial strain face the additional pressure of sustaining food production levels and with ongoing global supply chain issues, the question over domestic food security remains and could result in an over-reliance on imports.

Planning for Financial Resilience

Now, more than ever, farms and agricultural firms should evaluate their level of financial resilience. Valuation and strategic forecasting are key to mitigating any complications that arise with amendments to inheritance tax thresholds. Ensuring that businesses have robust and solid succession plans in place is now critical to ensure that relief claims can be maximised, without a need to sell their properties.

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