Keep up to date with the latest Stags news
Stags Farm Agency, reflect on Labour’s Autumn Budget, including the proposed changes to Capital Gains Tax (CGT) and Inheritance Tax (IHT) reliefs and what this could mean for farm and land sales.
The CGT rates on agricultural land is increasing, to align with residential properties:
This means that most parties selling agricultural land and buildings, either as part of a farm or as individual assets, will pay more tax. As a result, some sellers may be more resistant to negotiating on their sale price.
It will also have larger implications on those who have obtained planning consent to convert a farm building to a residential dwelling, using either Class Q or full planning, where the value of the ‘gain’ is significant; However, Business Asset Rollover Relief is available for those selling qualifying agricultural property assets and purchasing qualifying agricultural assets. So, for those selling development land and purchasing land elsewhere, this relief will continue to benefit them.
The proposed changes to Agricultural Property Relief (APR) and Business Property Relief (BPR) on IHT were unexpected and will have significant implications to most family farms and how these farms are passed between generations.
Most farms in the West Country will have a value of more than £1,000,000 and if the proposed changes are implemented without any changes, inheritance tax will be payable on the agricultural value of any property above this threshold.
Unless some careful tax planning and transfer of assets has taken place, for a family farm to be passed down, funds will need to be raised to pay IHT. Where a farming business is asset rich but cash poor, these funds are likely to come from either selling land or other property assets.
Individuals who do not actively farm and own agricultural property solely because of the APR benefits, will likely still have APR available, just not at the present rate of 100% of the agricultural value. From a buyers’ perspective, the proposed changes might encourage them to take early advice on succession planning and farming activities to ensure future tax liability is minimised.
Further information about APR and BPR is available here.
At first glance the proposed changes to IHT could impact on the demand for farms and land; however, during the past decade we’ve been through Brexit, farm support payments being reduced, higher interest rates and higher energy costs with none of these events, to date, having resulted in a significant impact on land values. Plus, with tax advisors having time to review the legislation, the indications are that forward planning hopefully will mitigate tax liability. At the moment we expect the status quo of a stable market to remain.
The NFU are currently working on a campaign to overturn the family farm tax, further information on this is available here.
“One positive outcome from the budget for the property sector is that everyone now knows where they stand, and can plan accordingly, although we’d be surprised if some amendments weren’t made to the government’s proposed changes to APR before they are implemented in 2026.” Says Andrew Dodds, Associate Partner & Stags Farm Agent.
For further advice on how the autumn budget may be affecting you and your property, please do not hesitate to contact our knowledgeable farm agency team on [email protected] or 01392 680059.
