Budget 2026: Gains and losses for farming businesses
© HerbySussex/iStockphoto Described by many as a “quiet Budget”, chancellor John Healey’s measures, announced yesterday (28 October), deliver both positive and negative points for farming.
Many were disappointed that there was little to encourage growth and investment in farming or other businesses.
See also: Why valuation preparation is key under new IHTB relief regime
Positive measures
- Fuel duty – the 5p road fuel duty rate cut is extended until July 2027, as is the 3.7p/litre diesel duty cut; these had been due to end in December.
- Business rates – for retail, hospitality and leisure sectors these are to be frozen for two years until 31 March 2029.
- Business rates reliefs – additional relief for pubs, social clubs and all but the largest live music venues comes in addition to the support introduced earlier in 2026, bringing total relief to 35%. This support will be provided in 2027-28 and 2028-29.
- Small business rates relief – for retail, hospitality and leisure, the threshold increases from £12,000 to £18,000, taking more diversified businesses out of the rates net.
- Alcohol duty rate – £10m in relief for Britains’s estimated 2,000 small brewers and cider makers, some of which are on farm.
- Full expensing – applies to companies only and will continue. It gives a 100% capital allowance on new plant and equipment investment in the year of expenditure.
- First year capital allowance (FYA) rate – this is to rise from 40% to 50% for all businesses from April 2027, paid for by a two points fall in the writing down allowance to 12% from April 2027.
- Self-employed fathers and partners will be eligible for two weeks’ paternity support worth up to £194/week.
Negative aspects
Business asset disposal relief
This relief from capital gains tax (CGT) is to be cut from April 2027 so that only £500,000 of eligible gains will attract the lower CGT rate of 18% (currently the threshold is £1m of gains).
This will potentially cost affected individuals £30,000, says Rob Hitch, a partner with accountant Dodd & Co.
If sales are taking place and owners want to benefit from the higher relief they will need to exchange contracts before 5 April 2027, says Sam Kirkham, a partner in the farms and estates team at accountant Albert Goodman.
Rental income
Landlords will pay 4% more income tax on property rental income from April 2027.
This comes from a two-percentage points tax increase in yesterday’s Budget on top of the two-point rise announced by former chancellor Rachel Reeves in the October 2025 Budget.
It takes the rates charged up to 24% for basic rate taxpayers, 44% for higher rate taxpayers and 49% for additional rate taxpayers.
Putting a further 2% tax on rental income will not encourage the letting of farmland, says Jeremy Moody, secretary and adviser to the Central Association of Agricultural Valuers.
With property rental possibly the most common farm diversification, adding another increase to the cost of letting property is disappointing, especially when farming businesses are so reliant on diversified income to support farm production and investment, says Sam.
Other measures
- National minimum wage – the rate for 18- to 21-year-olds is to rise 3.9% from April 2027, the same rate of increase applying to older workers on the national living wage.
- Biodiversity net gain – the requirement to provide BNG will be removed from residential brownfield developments on sites of up to 1.5ha, reducing demand overall but potentially benefiting some farmers and landowners who have brownfield sites for development.
- Tax compliance – HMRC is to get more investment in collecting overdue or undeclared tax
Founders relief may bring CGT opportunity
The Budget included plans for a new CGT founders’ relief from 6 April 2027, offering a CGT rate of just 10% on up to £10m of lifetime gains, supporting individuals who take risks to build and scale high-growth, innovative UK businesses.
This is a far higher level of relief than the 18% CGT rate currently available through business asset disposal relief (BADR) on up to £1m of gains – the threshold for which will fall to £500,000 from April 2027.
This proposal is subject to a consultation which opened on Budget day and closes on 30 November.
It appears to be aimed only at those operating under a company structure and the opportunity is expected to be available only in limited circumstances.
“We do not know what a ‘qualifying’ founder is at this stage but it is likely to be for the sale of qualifying shares in a company rather than land sales,” says Sam Kirkham of Albert Goodman.
At Dodd & Co, Rob Hitch says: “Given it would look attractive, I and some colleagues wonder whether this will stop people selling businesses now, hoping for better treatment in future, as we know there may be something potentially better than existing reliefs.”
Tenancy tax disappointment
Fundamental tax challenges facing the tenanted farming sector remain unresolved following the Budget, which Tenant Farmers Association (TFA) chief executive George Dunn describes as a “farm-blind and missed opportunity Budget”.
The TFA had lobbied for practical changes to support secure tenancies, productive investment and resilient farm businesses.
“We asked for protection where the death of a joint agricultural tenant leaves the surviving tenant with a tax liability but no saleable capital asset. The survivor needs to keep farming and not face a bill that business cannot fund,” says George.
“We also proposed 100% Agricultural Property Relief for land let under Agricultural Holdings Act tenancies and Farm Business Tenancies of at least 10 years without scheduled break clauses.
“That would give landlords a clear incentive to offer the security tenants need to invest in buildings, drainage, soil health and the long-term future of their businesses.
“Failing to act means missing a practical opportunity to support food production, environmental delivery and new entrants.”
Following the government agreeing that people paying rent on residential tenancies should not be liable for stamp duty land tax (SDLT) on that rent, the TFA wanted the same principle to apply to farm tenants paying rent.
“Continuing to levy SDLT on agricultural tenancies penalises longer agreements when we should be encouraging them,” says George.
