What the Autumn Budget 2026 means for farm tax and cashflow

Many were disappointed that the Budget offered little to encourage growth and investment in farming or other businesses.

The cut to business asset disposal relief, which offers a lower rate of capital gains tax (CGT) to those disposing of all or most of a business, will be a blow to those affected, but other CGT reliefs used by many farming families remain in place.  

With the Office of Budget Responsibility forecasting inflation (Consumer Prices Index) peaking at 3.75% early next year and set to average 3.4% in 2027, rising costs will continue to challenge businesses and consumers.

Further interest rate rises look more likely than the long hoped-for reductions.

See also: Why valuation preparation is key under new IHT relief regime

Tax payments changes

The papers released alongside the Budget speech point to continuing reform of the landscape in terms of digitisation of the tax regime and an increasing focus on compliance.

From 2029 many tax self-assessment income tax payers will have to make monthly or quarterly in-year payments. The measure is expected to accelerate the payment of £1.3bn of tax in 2029-30.

While this is some way off and will not change the amount of tax due, it is likely to create a substantial cashflow hit, and the impact could send some businesses to the wall, warns Stuart Maggs, tax partner at law firm Howes Percival.

Drive to digital

• Making tax digital (MTD) – self-employed people and landlords with more than £30,000 income will have to join MTD in April 2027. However, no penalties will be charged for late submissions of quarterly updates in 2027-28 for these newcomers to the system. Those eligible for qualifying care relief will be exempt from using MTD until further notice.
• VAT e-invoices – the Budget confirmed that VAT invoices must be issued as e-invoices from 1 April 2029. There is concern that full details of the UK’s proposed e-invoicing regime may not be known until April 2028, leaving businesses with little time to prepare.

Compliance measures  

• Direct debits for VAT and PAYE liabilities – the government proposes that from April 2029 businesses must set up direct debits for VAT and PAYE return liabilities. However, other payment methods can continue to be used to pay these liabilities before a cut-off date, after which the direct debit instruction will be used to collect any unpaid balances. 
• Correction of errors in tax returns and documents – from 1 April 2028 taxpayers will come under a general obligation to correct inaccuracies in tax returns and to document when they are identified. HMRC will have a new power to issue a customer correction notice where it suspects an inaccuracy.
• Increased tax collection and investigation investment – beginning in 2024, HMRC has been recruiting an additional 5,500 caseworkers to its compliance division, aiming to raise £6.8bn of additional tax revenue over five years.

With HMRC bolstered by more investment in collecting overdue or undeclared tax, everyone needs to make sure their house is in order, says Oliver Bond, a director at accountant Old Mill, part of the Kinbrook Group.

“We are already seeing more tax investigations, so it’s worth investing in tax investigation cover with your accountant, to protect against the time and cost should you be targeted,” says Oliver.

IHT pensions administration

Clear guidance is needed on how inheritance tax will be administered where pension assets sit outside an estate but may still be needed to settle tax liabilities, says Bethany Giles, associate in the wills, probate and estate planning team at law firm Gardner Leader. 

Without this, delays, increased costs and additional stress are risks for families also dealing with their own bereavement, she says.

“One of the key omissions from the Budget was greater detail on how the planned pension inheritance tax changes will work in practice. Clients want reassurance that executors will have access to the information they need to administer estates efficiently, rather than facing potentially lengthy delays while tax positions are confirmed. Instead, there are a lot of questions still unanswered.”

Tenancy tax disappointment

Fundamental tax challenges facing the tenanted farming sector remain unresolved following the Budget, which the Tenant Farmers Association (TFA) chief executive George Dunn described as a “farm-blind and missed opportunity Budget”.

The organisation 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 the business cannot fund,” says George.

The TFA also wanted 100% Agricultural Property Relief from inheritance tax for land let under Agricultural Holdings Act tenancies and Farm Business Tenancies of at least 10 years without scheduled break clauses, and reform of stamp duty land tax.

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Budget measures at a glance

Positive aspects

• Fuel duty – 5p road fuel duty rate cut extended until July 2027, as is the 3.7p/litre diesel duty cut – these had been due to end in December.
• Business rates frozen – for retail, hospitality and leisure sectors these are to be frozen for two years until 31 March 2029.
• Business rates additional relief – additional relief for pubs, social clubs and all but the largest live music venues. This is in addition to the support introduced earlier in 2026, bringing total relief to 35%. This support will be provided in 2027-2028 and 2028-2029.
• 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 qualifying investment by 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 – eligible for two weeks’ paternity support worth up to £194 a week.

Negative aspects

• Business asset disposal relief from CGT – this 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, due to take effect from next April, announced by former chancellor Rachel Reeves in the October 2025 Budget. These changes put the rates charged up to 24% for basic rate taxpayers, 44% for higher rate taxpayers and 49% for additional rate taxpayers.
  “The use of tenancies for restructuring may be impeded by the extra tax on rents, especially where the 44% and 49% rates apply,” 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 18–21-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 the gain will be removed from residential brownfield sites of up to 1.5ha, reducing demand overall for biodiversity units but potentially benefiting some farmers and landowners with brownfield sites.