Is the farmer in the den?

Introduction

The UK 2024 fall budget presented by Chancellor Rachel Reeves introduced a range of challenges and opportunities for the agricultural sector.

With the increase in labor costs, the adjustments of tax alleviations and the reduction of subsidies, the strategic planning of the management of the workforce and financial decisions will be essential.

Farmers, employers and those of agricultural recruitment and labor management must understand these developments.

We have described some of the questions and answers to guide you.

Q: What changes in the successions tax for British farms have been announced in the fall 2024 budget?

A: From April 2026, the first million sterling pounds of commercial and agricultural combined assets will remain entirely exempt from the tax on successions. For active ingredients exceeding 1 million pounds sterling, the tax on successions will apply to a reduction rate of 50%, which means an effective tax rate of 20% on the value higher than the threshold.

If for example, we have a family farm with a value of 4.5 million pounds sterling. Before April 2026, the whole farm (assuming that it meets the aid criteria for agricultural goods (APR)) would be exempt from the IHT. Quick advance to publish in April 2026, only the first 1 million sterling pounds would be covered by this relief, which means that the other 3.5 million pounds sterling would have only 50% relief (reaching a rate of 20 % of the IHT), which would lead to a responsibility of £ 700,000

Q: How should these changes have an impact on family farms?

A: These changes are feared threaten the long -term viability of family farms, especially young farmers. They are already confronted with continuous challenges just to remain profitable, therefore have to take into account 20% of the succession tax on the value of their commercial assets greater than 1 million sterling pounds could become an additional insurmountable obstacle for future generations.

Q: How will capital gain tax rates (CGT) allocate agricultural businesses?

A: The tax rates of capital gains have already or should increase the provisions of capital assets, whether they are eligible for the reduction in the elimination of commercial assets or not. This can lead certain agricultural companies that seek to take advantage of the current prices before they change compared to April 2025, others can choose to wait, hoping for possible turnover.

Q: Is there an “window of opportunity” to make changes before the new rules take effect?

A: Yes, companies seeking to take advantage of current rates APR and BPR have until April 2026. During this period, companies may be able to adjust their succession plans or consider other strategies tax economy.

Those who plan to sell must do so before April 6, 2025 to benefit from the current BADT rate of 10%. From April 2025, this increased to 14% before a final increase compared to April 6, 2026 to 18%.

Q: What will be the impact on land prices and agricultural structures?

A: Land owners can see structural changes in agriculture and land use. Farmers may need to reconsider the retirement of their business and land rental, because a relief of the THT on these lands is now limited. Two key factors will influence land prices: if buyers leave the market due to the reduction in the reduction of the IHT / increased CGT levels and if the supply of land increases because it becomes less attractive to keep the retired land.

Q: Will there be changes in the offer and rent of Let Land?

A: The offer of rental land may increase due to the reduced tax advantages of agricultural land in hand. However, it is not certain that this will reduce rents, because the profitability of the farm now strongly influences the rent levels.

Q: Should farmers consider presenting succession plans?

A: Farmers may want to consider accelerating succession plans before April 2026 to use current reliefs. For example, moving assets to a family member or in a trust and claiming 100% APR. However, we must be aware of the CGT as it can complicate it. Gift assets are treated as a sale for tax purposes, potentially arousing a CGT of 24% on unrealized gains.

Q: What impact changes in the reduction of the assets of companies will have on the transmission of farms?

A: The reduction in the elimination of the company’s assets will become less generous from April 2025. This change, as well as the adjustments in the IHT, could make the farms more difficult within the family . Ms. Millington notes that the sale is not necessarily a solution either, because the CGT applies to sales and that any remaining product can always be subject to the IHT.

Following steps

The protest being staged in London recently due to these proposed changes, there is a pressure considered on the government to reverse these proposed changes. So far, they seem to hold the ground.

It is imperative to ask for advice on this subject if you and your family are affected by the change.

In etc tax, we specialize in complex tax issues, and as such, would be exactly the type of advisor you will need on your side to plan your exit from these problems.

Contact us today!

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