As a leading regional law firm with a strong history of supporting the rural sector in the South West, we understand the unique challenges faced by farming families and farm businesses. The UK Budget 2024 introduced several significant legal changes that will impact our clients in the agricultural sector. By acting now, you can safeguard your family’s future and preserve your hard-earned legacy.
Here, legal experts from our Private Client, Family, Corporate, Employment and Real Estate teams come together to highlight the areas where they can provide key support to clients in 2025 and beyond with targeted, tailored, and expert advice to help you protect your family’s interests now and in the future.
Key areas of challenge for clients include:
1. Agricultural / Business Property Relief Reform
- Changes to Agricultural Property Relief (APR) and Business Property Relief (BPR) will increase inheritance tax liabilities for many farms and agricultural businesses.
- Significant financial implications for farm owners and their heirs, potentially affecting the sustainability and continuity of family-run agricultural businesses.
2. Capital Gains Tax (CGT) Increases
- Immediate increase in CGT rates impacts transactions involving the transfer of farm assets.
- It will be essential to review and adjust succession planning strategies to mitigate the impact of increased rates.
3. Increased Employment Costs
- Rise in national living wage and minimum wage, along with higher employers’ national insurance contributions starting April 2025.
- Significant additional expenses for rural businesses with narrow profit margins.
- Potential need to reduce employees, cut working hours, or find other cost-saving measures.
- Impact on sustainability and growth potential of rural enterprises; need to explore automation, improve efficiency, or diversify income streams.
- Further future impact on businesses through the reforms of the Employment Rights Bill including overhauling the use of zero hours contracts, drastically shortening the qualifying period for unfair dismissal claims and strengthening sick pay and family leave rights.
4. Support Payments Adjustment
- Introduction of a cap on Basic Payment Scheme (BPS) payments at £7,200 in 2025.
- Significant reduction in financial support for many farms.
- Necessitates re-evaluation of financial strategies to maintain profitability.
- Need to explore alternative income streams such as agritourism, direct-to-consumer sales, value-added products, or renewable energy projects.
- Farms must be more innovative and strategic in business management; seeking advice from agricultural consultants or financial advisors is recommended.
Taking steps to protect your legacy
We understand how important it is to ensure your legacy is protected and your assets are passed on to your loved ones with care.
How we can help
Navigating these changes requires careful planning and strategic advice. Our team is here to support you with:
- Succession Planning: working with you and your other advisors to mitigate the legal and taxation risks of transferring farm assets to the next generation.
- Inheritance Tax Planning: Reviewing your current tax position and exploring ways to mitigate increased liabilities.
- Employment Law Advice: managing and minimising the impact of the increased costs of employment and ensuring compliance with new law as it develops through the Employment Rights Bill.
- Diversification: We can help you to identify and exploit the most favourable options for diversification, from evolving technologies to ever-changing environmental and renewable energy opportunities, with sound advice that aligns with your family aspirations and values.
Understanding your options – Inheritance Tax (IHT) Review
No-one wants to pay more tax than they need to. Our team of dedicated tax specialists will guide you through the various ways you can plan your affairs to ensure the next generation are the main beneficiaries of your estate.
If you are an individual with over £325,000 in assets, our experience shows that an Inheritance Tax review would be a valuable exercise. Assets include everything from property, business interests (including stock and machinery) and investments to savings and pensions. This is why it is important to make appropriate plans.
Our experienced team are skilled at providing advice for our clients that reduces the potential tax bill. At the same time, the key to keeping as much of your wealth out of the hands of the taxman is advance planning and regular reviews. This is where our tax specialists really come into their own. Our UK tax planning solicitors can help you with issues around:
- Inheritance tax and estate planning using the most tax-efficient methods and making the most of APR and BPR.
- Wills – reviewing/updating your Wills to ensure they are consistent with your estate planning and take into account the present IHT legislation
- Trusts – advice on all elements of trust planning, creation and administration
- Income tax planning – keeping you updated on changes to the tax rules and helping you organise your affairs.
- Capital gains tax planning – planning for and taking steps to minimise its impact.
- Protection against divorce – advising you around pre and postnuptial agreements for those you might be transferring assets to.
- Contentious trust and probate issues – advising executors, trustees or beneficiaries when disputes arise in relation to trusts and estate.
Review your business structure
Farmers considering succession planning should review their current business structure. For example, does the business trade through a partnership or a limited company? If the former, the partnership agreement should be reviewed specifically in relation to:
- Whether or not the farm is a partnership asset. If not, consider on what basis the partnership occupies the farm.
- The identity of the partners and their entitlements to partnership capital.
- How the profits of the partnership are shared.
- What happens when a partner dies or wishes to leave the partnership.
- The ability of family members to transfer capital in the partnership freely between each other.
Where the business is held within a limited company then the directors and shareholders should review the company’s articles of association, statutory registers and any shareholders’ agreement to determine:
- The current shareholdings in the company.
- The respective rights of the shareholders to the income, voting and capital rights of the company.
- Any restrictions on the transfer of shares either during the lifetime of a shareholder or following their death.
Any business succession planning exercise should initially consider the matters set out above and whether a new partnership agreement, shareholders’ agreement or articles of association may be needed to facilitate a transfer of assets down to the next generation.
Managing enhanced employee rights
After a long period of relative stability in the field of HR and employment, the Labour Government have announced a series of very significant changes. Although most of those changes won’t take effect until 2026, there are steps employers should be taking now to be ready. Now would also be a good time to look at any tasks you’d like to achieve before the new laws take effect. The Employment Rights Bill is still progressing through Parliament and the proposed reforms will be subject to consultation, but it is likely that there are some key changes ahead:
- Unfair dismissal rights from day one of employment.
- New regulation around the use of zero and low hours contracts.
- Restricting the use of ‘fire and rehire’.
- Rights to paternity, parental and bereavement leave from day one of employment.
- Default flexible working.
- Strengthening protection for employees in collective consultation for redundancy.
It is important that you know both what is currently possible within your business, particularly if the financial position is becoming more strained, but also how that might develop in the future too so that you put the right strategies and plans in place.
Considering the impact of divorce
The complexity of farming divorces can make them among the most expensive, and the impact of divorce on a family farm can be catastrophic. That is why we recommend that farming families consider pre or postnuptial agreements to protect their family farms.
Pre or postnuptial agreements are becoming increasingly common to insulate farming assets against the unwanted effects of a divorce. For couples who are already married, postnuptial agreements provide the same level of reassurance, so it doesn’t have to be done before a wedding. These are used by farming families who want to pass ownership of the farm to the next generation after the intended owner has married.
These days, prenuptials are not just the preserve of celebrities – hard working farming families are choosing them too, to give them peace of mind.
The reality of entering into a pre or postnuptial agreement is that the process gives couples and their families clarity over previously unspoken areas of concern and enables them to proceed with their succession plans and manage the risk of relationship breakdown. In a farming context, this can mean reaching an understanding over who will retain the family farm and setting out how their spouse will be fairly provided for if they split up, without damaging the farm business.
Cohabitation agreements for unmarried couples
A cohabitation agreement is a written contract between two people living together but not married. It outlines each partner’s rights and responsibilities in relation to their shared life together, including financial matters, property ownership, and what happens in the event of separation.
The key benefits of having a cohabitation agreement include providing clarity and certainty, financial protection, estate planning and inheritance and preventing future conflict. It provides similar protections to pre and post nuptial agreements for those who are not married.
Supporting rural businesses to thrive
These are undoubtedly challenging times for farming families, but the theme throughout each challenge is that strategic planning for the future of your legacy can limit the negative impact on what you may be able to pass on to loved ones.
We are committed to helping our clients thrive despite these challenges. Please contact us to discuss how we can support your specific needs and ensure your rural business remains resilient and prosperous.
At Stephens Scown, we care about our clients, and we work hard to help you achieve your goals. Our people deliver practical, expert advice to help you make informed decisions. This is based on a deep understanding of your needs and a commitment to building long-lasting relationships through the good times and the tough times.