Budget offers no relief for farm families

County Fermanagh countryside. Picture: Cliff Donaldson

Commodity Watch written by UFU policy officer Daniel Toft.

The Chancellor’s Budget delivered confirmation of several significant tax changes that will shape the tax landscape for farm businesses in the years ahead. Inheritance tax remains the headline issue, and the UK Government confirmed that it will proceed with its plan to introduce a £1 million cap on the combined value of Agricultural Property Relief and Business Property Relief eligible for 100% relief from April 2026. Any value above this threshold will receive only 50% relief, creating an effective tax rate of 20%. The Budget also confirmed that this £1 million allowance will be transferable between spouses or civil partners, even if the first death occurred before April 2026. This is a necessary correction and brings the rules closer to the treatment applied to other allowances, although it is the smallest possible change the government could have made and should have been included from the outset.

The transferability announcement does nothing to address the core issue. The UFU has repeatedly highlighted that a fixed cap on relief creates a severe risk for family farms of all scales, particularly in NI where land values are much higher and our farming structure is overwhelmingly owner-occupied. Freezing the nil-rate band, residence nil-rate band, and the APR/BPR allowances until April 2031 only deepens these pressures. APR exists to protect continuity, avoid forced sales and sustain the fabric of family farming and arbitrary limits undermine this.

This is why our campaign against these proposals continues. Attention now turns to the Finance Bill which provides the opportunity for amendments. The second reading is scheduled for 16 December and thereafter the Bill will move into committee stage in the new year. The UFU is already actively engaging with parliamentarians across the political spectrum and setting out real world consequences for NI farm businesses whilst working closely with the other farming unions so that the sector speaks with one voice. We will continue to engage with politicians and support efforts to amend the Finance Bill appropriately.

While inheritance tax is the headline concern for members, the Budget included several other measures that will shape finances on farms and in households. Income tax thresholds remain frozen until April 2031, which will be the largest revenue raising measure in the Budget and extends what has already become a prolonged period of fiscal drag. As wages and profits rise with inflation, more individuals will be pulled into the higher and additional rate bands. From April 2027, income tax rates on rental and savings income will rise by 2%. Dividend tax rates will also increase by 2% from April 2026, taking the basic rate to 10.75% and the higher rate to 35.75%. Another major shift confirmed in the Budget is the decision to bring pension death benefits within the scope of inheritance tax from April 2027. This is a substantial change to the treatment of pensions, which until now have largely sat outside the IHT regime.

The Soft Drinks Industry Levy, more commonly known as the ‘sugar tax’, will be extended. The exemption for sugary milk-based drinks and milk substitutes will be removed which means that milkshakes, flavoured milks, and sweetened coffee will come into scope. The threshold for sugar content will be reduced from 5 grams to 4.5 grams per 100ml from January 2028. However, the Office for Budget Responsibility expects that most of the sector will reformulate drinks to avoid the levy.

These measures within the Budget create a challenging financial backdrop for farm families. Freezes to thresholds, rising tax rates, and the introduction of new levies all coincide with a period of high input costs and tightening margins. The UFU will continue to highlight the impact of these measures.

As the Finance Bill progresses, we will intensify our engagement with politicians to ensure NI’s voice is heard clearly and consistently. Our approach is evidence-led and grounded in the lived experience of members who understand the realities of farming and succession planning. We will continue to work in partnership with the other UK unions and continue to call for the overturn of the inheritance tax changes.