Autumn Budget Analysis: What it means for the land, rural and property sectors
The Chancellor delivers the Autumn Budget 2024 - Image from HM Treasury
Autumn Budget Analysis: What it means for the land, rural and property sectors
Many farmers and landowners thought they’d had a raw deal from the Conservatives and hoped for better from Labour.
In the first Labour Budget for 14 years, delivered on Wednesday (Oct 30) many will have felt let down once more.
Of greatest concern in the run up to the Budget were fears of a change to inheritance tax rules as they apply to farmers. On Wednesday those fears were realised.
Rural businesses face, at best, uncertainty over succession planning and, at worst, damaging knock-on effects that could damage the wider rural economy and threaten food security and the environment.
There are warnings that many family farmers will be forced to sell-up rather than hand on their farms to their children after Chancellor Rachel Reeves scrapped the 100% agricultural inheritance tax relief and introduced a £1m threshold.
All assets over £1m will, from April 2026, be subject to inheritance tax, with 50% relief, at an effect rate of 20%. The rising price of land and rural property mean that even small family farms are likely to now fall into the inheritance tax bracket.
Within hours of the announcement farmers were assessing the impact of the Chancellor’s decision on their own businesses. Farmer Clive Bailye told Farmers Weekly: “When my parents pass away, I will now have no choice but to sell the land and property they and previous generations worked so hard and took huge risk to build. My children will never have the opportunity to farm.”
The Chancellor said the measure will raise £2.6bn, one of a number of tax-raising initiatives in the biggest tax raising budget for generations designed to bring in a total of £40bn.
CLA President Victoria Vvyvan had told KOR Communications’ Estate Matters podcast in July that meddling with inheritance rules risked doing damage to family farms. She told podcast host Anna Byles at the time: “If you tax land on death, for these multi-generational businesses that means you are going to have to sell land and those family land holdings…their capacity to be a proper business is diminished.”
On Wednesday, after the Budget, she warned 70,000 UK farms could be negatively affected by the change, saying that Labour had made “repeated assurances” in the last 12 months it would not tamper with inheritance tax reliefs.
Writing on X (formerly Twitter) Victoria said: “We estimate capping agricultural property relief at £1m could harm 70,000 UK farms, damaging family businesses and destabilising food security. This puts dynamite beneath the livelihoods of British farming and flies in the face of growth investment.”
The changes come on top of an unsettling period for British agriculture, with an end to the subsidy support under the Basic Payment Scheme, mixed take-up of the environmental incentives designed to take its place and challenging weather and market conditions.
The scrapping of full inheritance tax relief on farms marks a further erosion of policies, in place since the Second World War, designed to cushion farming from the instabilities in the sector to ensure Britain can continue to feed itself.
Victoria went on: “Many farmers, operating on slim margins, will now face having to sell land to pay inheritance taxes. At a time of profound change in the industry, adjusting to new agricultural policies, the government is offering no vision for a positive economic future for us in the rural community. We will continue to argue the case for these vital reliefs.”
The Budget also failed to provide an increase in the overall agricultural budget leaving it, the CLA says, at the same level that it has been stuck at since 2019. Victoria warned this would have “consequences for hard-pressed farmers, consumers and the environment”.
She said: “It could hit sustainable food production and undermine improvements to wildlife habitats, flood management and access to nature.”
The Agriculture and Horticulture Development Board (ADHB) also criticised freezing the farming budget at £2.4 billion. ADHB Economics and Analysis Director David Eudall said that over the period that the budget had been frozen, inflation had pushed up farm costs by 44%.
He said: “We are at a tipping point of how effective this budget can be in meeting the desired outcome of balancing food security, supporting farm efficiency, and delivering environmental benefits given the inflationary pressures we see.”
There was better news for housebuilders in the Budget with investment of £5bn through to 2025-26 to help deliver the Government’s plans to build 1.5m homes over the next five years.
A further £3bn in support will go to small housebuilders and the build-to-rent sector, while almost £50m is earmarked for investment in recruitment and training to boost staff numbers in local council planning departments.
Adrian Watts, CEO at Croudace Homes, who are building legacy developments on sites that formerly belonged to the Englefield Estate in Berkshire, praised Labour for sticking to its words on housing.
He said: “Starmer’s Labour government has been clear from day one that they want to deliver on housing, a staunch contrast to their predecessor, with housing ministers in recent years causing political unrest for our industry.
“Labour has stuck true to their word so far, wasting no time in ripping up archaic and restrictive planning regulations and supporting housebuilders, particularly SMEs, in their development programmes. Housebuilding is a vital cog within the country’s economy, and without the right support, this will have huge ramifications for economic growth.”
Kate Henderson, Chief Executive at the National Housing Federations, said the Budget demonstrated the Government’s commitment to social housing was on a par with its support for the NHS and schools.
“With the delivery of new social homes at risk due to funding constraints, a £500m top-up to the affordable homes programme is hugely welcome and something we’ve been urgently calling for to prevent a collapse in delivery,” she added.
“We also support the government’s decision to review Right to Buy discounts; with record levels of overcrowding and child homelessness, it is vital we protect our existing social homes.”
Landowners with sites available for house building may find something to cheer about as the dust settles on the Budget. Those who farm – particularly on small family-owned holdings – will be weighing up their options. The impact could be dramatic for the rural economy and land ownership, changing the make-up of the countryside and food production across the UK.