Beware of Spiders, Monsters, Witches, Skeletons, Ghosts, Zombies.......& Politicians

As the upcoming UK budget draws closer, businesses across the country are keeping a close eye on potential changes that could affect their back pocket. For those in the agricultural sector, two key areas of concern are capital gains tax (CGT) and inheritance tax (IHT) – both of which could see significant alterations that would have far reaching implications stretching well beyond the industry itself including many of us reliant on the produce created by agricultural communities.

Far from a fiscal expansion policy that would include tax cuts to encourage spending and business investment the new labour government looks to be going after the ‘easy wins’. Capital gains tax, currently applied to the profit made on the sale of assets such as land, is expected to be reformed in the upcoming budget. There has been ongoing speculation that the government may seek to align CGT rates with income tax rates. This would represent a substantial increase, especially for those who hold significant amounts of land as part of their business operations.

If CGT rates rise, it will likely have a direct impact on the agricultural community, especially those considering selling assets. Farmers who are looking to downsize, retire, or restructure their businesses may face much higher tax bills than anticipated. This could slow down the sale of agricultural land, as sellers may hesitate to incur such costs.

For businesses that operate in groundworks, construction, and land-based services, this could lead to a ripple effect, as fewer land sales may reduce demand for development and maintenance projects and will likely drive up the prices of these services and therefore the end product - the housing market. There is also a kicker; inheritance tax is another area under scrutiny, and any changes here could deeply affect agriculture. Currently, farmers benefit from agricultural property relief (APR), which reduces the value of agricultural land and property for IHT purposes. However, there is speculation that the budget may seek to reduce or reform these reliefs, increasing the tax burden on inherited farmland. This is going to make many of the future generational farmers give some serious consideration to planning their financial and professional futures. For many family-run farms, the passing of land and assets from one generation to the next is critical for the long-term survival of their business. Any reduction in APR or tightening of IHT rules would make it more expensive for families to transfer their farms to the next generation, putting additional strain on an already pressured industry.

Such changes could discourage generational farming and lead to increased sales of land to larger agribusinesses or developers, potentially driving small-scale farmers out of the market. This could also increase demand for services related to estate planning, as families seek new strategies to protect their assets from the rising tax burden.

Preparing for the Future

As these potential changes to capital gains and inheritance tax loom, it's crucial for businesses to stay informed and prepare accordingly. For those in the agricultural and land-based sectors, planning for future tax liabilities is more important than ever. Engaging with financial specialists and tax specialists to explore options such as tax-efficient asset transfers or restructuring could help mitigate the impact of any budget changes.

Groundworks companies, machinery dealers, and other businesses serving the agricultural community should also be aware of how these changes may affect their client base. As tax burdens increase, farmers and landowners may look to reassess their spending on equipment, construction, and services, potentially tightening budgets and reducing demand for external services.

At FTA we are constantly trying to build our community of agricultural and construction associated businesses and consumers so that we can support and guide you through the coming months and beyond. With an in house financial team we are always on hand to support with your purchases and future plans and very much welcome your feedback, input and questions so that we can improve what we are doing to better serve you and support those that actually support the growth of the UK’s economy.