Given the drastic revisions to Agricultural Property Relief (APR) and Business Property Relief (BPR) announced in the 2024 budget, when the Chancellor’s 2025 budget included minimal change to these it was thought that the year of campaigning from the agricultural sector had fallen on deaf ears (or that at least the position wasn’t made worse, depending how pessimistic your outlook). The only real change was to make the £1m 100% relief allowance transferable between spouses.
However, the sector received a small amount of festive cheer on 23 December last year when the government announced that the reduced cap for 100% relief of £1m for both APR and BPR from 6 April 2026 would instead be set at £2.5m.
“After the bombshell of the 2024 budget, the agricultural sector could have been forgiven for just hoping the 2025 budget wouldn’t make anything worse,” Chris Solt, agricultural partner at chartered accountants Lovewell Blake, reflected. “So, to have a 2025 budget which included no changes to areas such as Annual Investment Allowance towards farm machinery or an extension to the number of years a donor has to survive after making an exempt gift felt like a win.”
Mr Solt acknowledged that, while a full abolition of the ‘Family Farm Tax’ was the aim of many of the protests over the past year, the increase to reliefs was an unexpected positive considering how the nation’s finances were presented at the budget. “While the most recent announcement falls short of the full U-turn that many in the farming community were calling for, it will at the very least result in reductions to the projected Inheritance Tax exposures of family farms across the country. One immediate ask going forward will be that these revised limits now don’t remain set in perpetuity but are kept under consideration.”
“Given the current value of agricultural land, the increased cap to APR and BPR will still leave many family farms with Inheritance Tax liabilities that existing cashflows would struggle to fund,” Mr Solt concluded. “Proper succession planning is still therefore something all family owned farms will need to pursue, both as a tax planning exercise but also to help make farming businesses more resilient to any other tax changes which future budgets announce.”