At a recent rural update, sector specialists from professional services firms Stephens Scown, Carter Jonas and PKF Francis Clark came together to answer some of the pressing questions concerning the rural community, and particularly those from Cornwall’s farming families and landowners.
There was talk about the window of opportunity between now and April 2026 in which to put plans in place and explore options available to farmers to mitigate the impact of Rachel Reeves’ Autumn Budget and to try and preserve their assets for future generations.
The specialist Rural team at Stephens Scown has a long-established relationship with farmers, landowners, and estate managers across the South West and further afield. The impact of the Autumn Budget has understandably led to concerns and questions from those potentially affected and featured heavily in the media.
Thankfully, there are practical tips and steps that farmers and landowners can take in response to the Chancellor’s budget.
1. Don’t panic
Farmers need to address this change in circumstances, but they should not panic.
There is time to make tax efficient arrangements and to take individual and bespoke advice about what they want to do to secure the future of their farm. The most important steps are the ones which move the process of tax mitigation forward – because the biggest enemy of tax mitigation is time.
2. Explore your options
These proposals are not expected to come into effect until April 2026. This means that there is time for farmers all over the UK to make arrangements where possible to mitigate the additional tax liability. We expect another fiscal event next year, possibly in the autumn, and we are advising that plans to make lifetime gifts or other value sharing options are best completed within the next 8 months.
The devil will – as always – be in the detail expected in January 2025. The main activity we expect to see is in the area of shared ownership of farms where that is possible. As the new 100% APR allowance is not transferable, it is important to allocate a share of the farm to as many partners as is required to cover the value of the farm. Other value sharing options could involve incorporation and the allocation of shares in the new family farming company between family members.
Gifts made more than seven years before death remain exempt and what the new rules may bring about is an earlier movement of farms from one generation to another. Transfers into trusts will also be suitable for some families who are not able or ready to make absolute gifts of parts of the farm.
3. Consider the impact of divorce
The Autumn budget included significant changes to the tax treatment of business and agricultural reliefs for IHT purposes from 6 April 2026. The path was also laid for pensions to fall into estates for IHT purposes over the coming years.
These changes will prompt many financial professionals to review and adapt their suite of wealth-planning strategies.
One of the approaches they might look at is to encourage their clients to transfer assets to their beneficiaries early. All being well, the tax bearing assets will have been transferred over seven years prior to the death of the transferor and not fall foul of IHT at all. But there could be a limitation on the IHT relief available if the death occurs within seven years but after April 2026. The available APR may be limited to the first £1,000,000 and at a rate of 20% thereafter.
Whether in any given situation this is a sensible thing to do will depend on many things, to include the receiving party’s personal situation, and particularly their marital situation. If the son or daughter receive the advance on inheritance only to later divorce, any tax saving may be dwarfed by the settlement the inheritance then has to fund.
Many couples are advised to consider that to best preserve transfers they receive from relatives, they should look at a postnuptial agreement (or prenuptial agreement if they are about to marry). Such agreements carry significant persuasive weight if they are drafted correctly with the necessary legal safeguards in place.
A concerned parent advised to take advantage of the seven-year rule will often be reassured when they learn how much weight nuptial agreements carry. On the back of the budget announcement, it is something that is strongly recommended to be considered in the right circumstances.
4. Be alert to changes to Employment rights
The rate of Employer National Insurance Contributions will increase from 6 April 2025 from 13.8% to 15%. The secondary threshold for when employer National Insurance contributions begin will decrease from £9,100 to £5,000.
To offer some protection for smaller businesses, the government has increased the Employment Allowance from £5,000 to £10,500 and expanded it to apply to all eligible employees. This means that employers will only start paying their National Insurance contributions when their bill rises above £10,500.
5. National Living Wage – how to prepare for the changes
We have an in-depth article on the changes to National Minimum Wage and how you as an Employer can prepare for the changes as the National Living Wage will increase on 1 April 2025. The rate will increase to £12.21 which is an increase of 6.7% for adults over 21. The rate for adults between 18-20 will also increase to £10 from £8.60, this is in line with the aim set out by the Labour Government to close the gap between the age bands set out in the minimum wage.
6. Invest in sustainable practices
There are opportunities to take advantage of government incentives for climate-smart agriculture. This can improve long-term sustainability and resilience. Programmes supporting soil health, water conservation, and renewable energy can also enhance farm productivity.
7. Be proactive with debt management
Cash flow is paramount to the success of any business, and debt recovery can be key. When you don’t use a lawyer, you may miss out on claiming late payment interest and statutory penalties. Under the Late Payment of Commercial Debts Act, creditors can recover 8% above the base rate. Additionally, businesses can claim between £40-£100 for each overdue invoice. This not only compensates for the delay, but also serves as a deterrent against future late payments.
We recover debts of all sizes for businesses of all sizes, allowing them to maintain focus on their future success. Find out more about DebtLink costs to support your rural / agricultural business.
8. Farmland Ownership
Farmers should consider what the current position is with their ownership of farmland. Is it partnership property or owned by an individual and let to a partnership etc. Often the beneficial land ownership isn’t what farmers might have understood, and this is a good starting point for their accountants and advisers to be able to then advise them correctly.
9. Stay Informed and Advocate
Keeping up to date with policy changes and participating in agricultural advocacy groups can help ensure that farming families’ voices are heard in future legislative decisions. Engaging with local and national representatives can help shape policies that support the agricultural community.
Thanks to the following for contributing to the above article:
Phil Reed, head of the Rural team at Stephens Scown
Tom Biddick, head of the Private Client team at Stephens Scown
Tamara Hasson, Partner in Stephens Scown’s Inheritance and Trust Disputes team.
Andrew Barton, Partner and head of the Family team at Stephens Scown
Sarah Atkinson, Partner and head of the Firm’s Family Finance team
Susan Reynolds, Partner in the Rural team at Stephens Scown
At Stephens Scown, we have a strong team of rural and agricultural specialists across the South West and are ranked by independent legal guides, Legal 500 and Chambers and Partners. To find out how we can assist you please contact our team today.