Farmers will find little in the Chancellor’s Budget to celebrate – although following last year’s tumultuous inheritance tax changes, a quieter offering could be welcome. “John Healey has done little more than tinker around the edges,” says Oliver Bond, director at Kinbrook Group’s Old Mill. “But farmers might welcome an unexciting Budget from a government that seems to be trying to rebuild some confidence in business.”

On the positive side, the freeze in fuel duty until next summer – which includes red diesel – will be welcome, particularly given the challenging backdrop created by the war in the Middle East. “And many who have diversified into hospitality will benefit from the increase in the annual threshold for business rates, from £12,000 to £18,000.”

However, most other announcements were negative, adding incremental cost or burden to rural businesses. Labour costs – already huge for many businesses – will increase by 3.9% as the minimum wage rises to £13.21/hour. And self-employed workers will likely see a switch from making two income tax payments a year to four a year as Making Tax Digital expands from 2029.

Tax investigations

“Ominously, we have heard of HMRC being bolstered with more investment in collecting overdue or undeclared tax – so everyone needs to make sure their house is in order,” says Mr Bond. “We are already seeing more tax investigations, so it’s worth investing in tax investigation cover with your accountant, to protect against the time and cost should you be targeted.”

Farmers hoping for a reversal in Rachel Reeves’ inheritance tax increases were disappointed. “But we were worried about changes to agricultural property and business property relief, which didn’t materialise – indeed, the Government has said it wants to protect the ability to hand on a family business,” notes Mr Bond.

However, those selling all or part of a business have been slapped with a significantly higher tax take. Business asset disposal relief against capital gains tax, levied on the sale of a business, has been cut from £1m to £500,000. “It was £10m a few years ago – there is ever diminishing tax relief for entrepreneurs,” he adds. “The newly announced founders’ relief – levying 10% capital gains tax on lifetime disposals up to £10m – could be good news, but the devil will be in the detail.”

Capital allowances

Anyone investing in machinery or other capital assets will enjoy an increase in the first-year capital allowance, from 40% to 50%. But this has been funded by a reduction in the writing down allowance, from 14% to 12%, which will impact larger farms with a high capital expenditure,” says Mr Bond.

Finally, a two percentage point increase in income tax on savings and rental profits from next April will add further to the tax burden. “The headline figures aren’t large, but the drip-drip of incremental increases in several areas will continue to weigh on rural business across the board.”

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