AHDB: Budget makes it harder to balance food security and nature restoration
As part of the budget, the government has announced the farming budget will remain at £2.4 billion for 2025/26.
David Eudall, AHDB Economics & Analysis Director, said, “The funding pot for agriculture in the UK has remained constant at £2.4 billion since the 2019-24 parliament. During this time, inflation has led to a 44 per cent increase in farm costs while the agriculture budget remains the same.
“We are at a tipping point of how effective this budget can be in meeting the desired outcome of balancing food security, supporting farm efficiency, and delivering environmental benefits given the inflationary pressures we see.”
In addition, in widely anticipated news, there are significant changes to the inheritance tax for UK farms.
From April 2026, the first £1 million of combined business and agricultural assets will continue to attract no inheritance tax at all, but for assets over £1 million, inheritance tax will apply with 50 per cent relief, at an effective rate of 20 per cent.
David Eudall, AHDB Economics & Analysis Director, said, “The impact of the changes to inheritance tax means that from April 2026, a farm worth £2 million will have a £200,000 tax requirement to pay on the £1 million above the threshold. For every additional £1 million the farm is worth, a further £200,000 will be required to be paid in inheritance tax.”
Nature Friendly Farming Network: “Better news than we could have hoped for”
In response to the Autumn Budget announcement, the Nature Friendly Farming Network (NFFN) has praised the government’s decision to increase agricultural spending, calling it a vital and timely support for a sector facing the urgent challenges of climate change.
Following weeks of predominantly concerning headlines regarding potential budget cuts, the Nature Friendly Farming Network (NFFN) praises Chancellor Rachel Reeves’ decision to invest in agriculture as a transformative opportunity for the sector to prepare for future challenges and the impact of climate change.
The farmer-led organisation is pleased that the government has recognised the importance of making farming more environmentally friendly to address critical issues such as food security, resilience against an uncertain future, and the alarming declines in nature and biodiversity.
Martin Lines, NFFN CEO, said, “This decision by the government is better news than we could have hoped for in the lead-up to the budget. We are pleased that the government has listened to us and that the Chancellor has recognised how crucial maintaining investment in nature-friendly farming is and how food production and nature’s recovery go hand in hand.
“This maintained funding is a much-needed boost for a sector that greatly needed confidence from the government. Increasing funding and prioritising nature-friendly farming will help put agriculture on a more sustainable footing and enable the changes required to continue feeding our nation as climate change presents ongoing challenges.”
Despite the positive news, the NFFN emphasised that while the government deserves congratulations for this funding commitment, there is still much work to be done to drive the transition to nature-friendly farming at scale, including necessary changes to England’s Environmental Land Management schemes (ELMs).
The organisation said a commitment to opening applications for the Higher Tier of Countryside Stewardship (CS) early in 2025 was particularly pleasing and also welcomed the move to pay £60m through the Flood Recovery Fund to farmers affected by extreme weather events last winter.
Mr Lines said, “Currently, the majority of ELMs funding is directed towards the schemes with the lowest ambitions for nature, placing minimal demands on farmers. This must change, with more ambitious schemes receiving sufficient funds to realise their full potential.
“I particularly welcome the move to open up the Higher Tier of CS, as there have been many problems with it and it has caused a lot of worry, especially for upland farmers for whom balancing environmental outcomes and food production is vital.”
However, the NFFN says the budget was not all good news. It warns that some farm businesses will now have to urgently rethink their plans and could find themselves struggling as the phaseout of land-based payments is quickened, while there is also considerable concern that the government’s changes to agricultural property relief will require careful tax planning and could have a particularly significant impact on family farms.
In addition, the NFFN points out that while the government’s spending boost is welcome, it still falls short of the £5.9bn per year recommended in the Scale of Need report. The organisation is also seeking commitments from the devolved governments in Wales, Scotland and Northern Ireland to ensure nature-friendly farming is rolled out at scale right across the UK.
Mr Lines said, “We urgently need fundamental changes to make our farm businesses financially resilient, enabling farmers to continue producing food amid the climate crisis and protecting our long-term food security. A healthier farming budget will be instrumental in achieving this, but now is not the time for ministers to hold back.”
National Farmers Union: Farmers are left “reeling” from the announcements
Changes to Agricultural Property Relief (APR) and Business Property Relief (BPR), despite repeated assurances from ministers that this wouldn’t happen, put the futures of many family farms and the people who farm them at risk.
Farmers are also reeling from the announcement of a speeding up of the phasing out of old support schemes, which amounts to a significant cut to farm incomes, at a time when their replacement schemes still leave many farm businesses locked out.
Together with wage rises and added costs to businesses that apply across the economy, these policies raise serious questions about the future of British food security and the impact on food supply and prices.
NFU President Tom Bradshaw said, “It’s clear the government does not understand that family farms are not only small farms, and that just because a farm is a valuable asset it doesn’t mean those who work it are wealthy. Let’s not sugar-coat this, every penny the Chancellor saves from this will come directly from the next generation having to break-up their family farm.
“This is one of a number of measures in the budget which make it harder for farmers to stay in business and significantly increase the cost of producing food.”
NFU said that there was some good news within the budget, as those hit by devastating rainfall earlier this year will ‘immediately’ have access to the £60 million Farm Recovery Fund, an increase of £10 million.
The agricultural budget for England has also been maintained, with Defra confirming this year’s budget to be £2.6 billion to reflect the underspend from the previous government.
Leaders Romans Group: Landowners should “seek good professional tax advice”
Ian Barnett, National Land Director of Leaders Romans Group (LRG), said, “As expected the government has raised Capital Gains Tax and Inheritance Tax, also removing agricultural relief on Inheritance Tax.
“The implication of the rise in Capital Gains Tax is that land sales will become less profitable to landowners because of the higher level of tax payable. As far as Inheritance Tax is concerned, the cost of settling an estate in probate will increase both as a result of the percentage increase in tax payable and because tax is now payable not only on monetary inheritance but on the value of land that forms part of the estate.
“In some circumstances it may become necessary, against the wishes of its owners, for inherited land to be sold, resulting in the breaking up of farms which may have been within a family for centuries.
“Prior to the budget, I discussed this issue with several landowners, whose response to the likely change varies considerably. Many larger, institutional landowners will stall plans to sell land and ‘sit it out’ until a change of government and a reversal of the change.
“Others lack this flexibility and will sell despite the additional tax burden. The good news for landowners in this position is that while the tax burden has increased, so too has the likelihood of gaining planning consent.
“Land which does not currently have planning consent (and may have been unlikely to achieve planning consent prior to the general election) now has a greater chance of gaining consent, and is therefore of greater value, due changes in planning policy.
“Some landowners will have negotiated a tax freezer clause, removing or delaying their sale obligations. In most cases however, tax freezer clauses start at 50 per cent, so this is irrelevant bearing in mind that Capital Gains Tax has been raised but to a lesser amount, and there is no certainty over if and when the tax burden may change in future.
“So who are the winners and losers in this situation? There are always unintended consequences of changes to tax regime and this budget is no different. Unfortunately smaller-scale family farms will be worse off – and I challenge anyone to demonstrate that a farmer is not a working person. Conversely, land sold through necessity could be bought by large-scale corporate farming businesses – those for whom Capital Gains Tax and Inheritance Tax are not a concern and have considerable opportunity to grow their businesses following this budget.
“Transferring land in personal ownership into a company structure may prove a canny move for smaller-scale landowners too. Some landowners will have already transferred their land holdings into a Limited Company or a Family Trust.
“My message to all landowners is to seek good professional tax advice. In the case of a land sale, do so at an early stage to reduce your tax burden and increase the options available to you. If you are part-way through a land sale, ask your solicitor to review the contracts to check your position. Stay tuned to changes in planning law, which may provide some welcome news.”