From Inheritance Tax to Investment: What the 2025 Budget Means for Your Farm

In response, Sumer’s agricultural specialists Jack Deal, Farms & Estates Partner at Scrutton Bland; Mark Smeaton, Partner at EQ; and Andrew Perrott, Partner at Monahans share their insights on what the Budget means for the sector.

Together, they paint a clear picture of what these changes mean for succession planning, rural diversification, and long-term resilience.

And while the Budget avoided some of the seismic reforms feared earlier in the year, the changes announced – and, in some cases, those left unaltered – could carry significant implications for long-term planning, investment, and farm business resilience.

“The 2025 Autumn Budget brought welcome stability for the agriculture sector after a year marked by uncertainty. Despite many protests over the Government’s Inheritance Tax (IHT) reforms, the Chancellor confirmed that the October 2024 changes remain on track.

Meaning that from April 2026, the £1m allowance for 100% Agricultural Relief and Business Property Relief will be introduced, but now with unused allowances being transferrable between spouses and civil partners – including where the first death occurred before April 2026.

Importantly, rumoured limits on lifetime gifting did not materialise.

Core Capital Gains Tax (CGT) reliefs – including rollover relief and hold-over relief – remain untouched, offering reassurance for farming families planning succession. The base cost uplift on death, a long-debated area of reform, also survives for now, a significant outcome for landowners given wider IHT changes.

Some of the property-related measures may create new pressures though.

A proposed High Value Council Tax Surcharge (HVCTS), applying from 2028 to homes worth over £2m, could disproportionately affect estates with high-value farmhouse property.

Capital allowances will shift from April 2026, with Writing Down Allowances reducing from 18% to 14%. However, a new 40% First Year Allowance—available to partnerships that cannot access the Annual Investment Allowance—will provide some relief. The AIA itself remains at £1m.

Beyond taxation, the Government plans to allow Mayors to introduce local visitor levies on overnight stays, a move that could add cost pressures for diversified farms offering holiday accommodation. Other announcements included maintained support for in person rural betting and racing, which will have come as welcome news across the west of our region, and future restrictions on National Insurance savings available through pension salary sacrifice schemes.

Overall, the Budget offers some breathing space for now, but signals areas where farms will need to stay agile and plan ahead.

So, early planning and proactive advice will be essential as the sector seeks clarity on longer-term Government support and the evolving tax landscape.

“The Autumn Budget offered little in the way of meaningful support for an agricultural industry already under significant pressure. Farmers continue to face rising costs and operational challenges, and these announcements do little to ease that burden. In fact, the reduction in the capital allowance written down relief from 18% to 14% is likely to slow down investment decisions, making it harder for businesses to modernise and remain competitive.

There’s some light relief in the form of the £1 million transferrable exemption for spouses, which will help with succession planning and family-owned operations.

However, rural motorists, many of whom are closely tied to farming, will feel the pinch from the introduction of a mileage-based tax for electric vehicles. This adds another layer of cost at a time when margins are already tight.

On a positive note, there have been no changes to gifting rules, including the continued availability of holdover relief for Capital Gains Tax (CGT) purposes. This stability will be welcomed by those planning for long-term asset transfers. While there are some minor wins, the broader picture remains challenging for the sector.

“I spent the morning of the Budget attending the annual Fatstock show at Frome Market – always a highlight of the annual calendar of events and in surprisingly good form with a large class of young farmers entering this year.  Something very encouraging to see despite everything else going on in the world of farming at the moment.

As a result, I was totally unaware of the morning’s unprecedented error by the OBR and must have been one of the few people hearing the budget for the first time when it was presented to the commons!

With such a large percentage of dairy farmers here in the southwest a key stand out point to note was the disappointing (although not surprising) news that milk-based products will be subject to the sugar tax from 1 January 2028, despite the significant health benefits of milk.

And, with national minimum wage increases on top of last year’s National Insurance contribution increases, this means further challenges at a time when dairy margins are already under pressure.

The news that the £1m BPR/APR allowance will now be transferable between spouses was of course welcomed and that the 7-year tapering for gifts that qualify as Potentially Exempt Transfers has not been extended to 10 as some commentators had suggested.

Importantly for many businesses and families who we’re helping with succession planning and re-structuring, is that there were no changes to the holdover relief legislation.

Despite the significant amount of discussion and commentary leading up to the budget around potential changes to the taxation of partnership & LLP income, this remains largely unaltered, however the 2p increase in the basic, higher and additional rates of income tax for dividend, rental and savings income will be unwelcome news for the many farming businesses that rely on this diversified income to offset the loss of the Basic Payment Scheme and the more volatile dairy farming returns.

We also appear to be returning to the old 40% first year allowance for plant and machinery purchases which will no doubt once again result in complex transitional arrangements.

Finally, although not a problem for all clients, the new mansion tax on properties worth over £2 million will be an unwelcome extra burden for those clients whose properties, who despite being busy working farmhouses are valued over this amount due to location or other external factors.