Much has been written in the press about how the budget on 30 October will affect farmers. Rob Hitch, one of our farming partners, looks at the key points for farmers.
Restriction of Agricultural and Business Property relief for IHT
As has widely been reported in last weeks' first labour budget in 15 years APR/BPR has restricted to the first £1 million of qualifying assets.
Assets above this will qualify for 50% IHT relief so attracting a tax rate of 20%.
Unspent pensions will be subject to IHT
The government confirmed a widely expected change to the IHT status of unspent pension funds. They will now form part of a deceased persons estate for IHT.
Capital Gains Tax
Changes to CGT rates were announced with the main rates increased from 30 October as follows:
Tax Brand Old Rates New Rates % Increase
Basic rate 10% 18% 80%
Higher rates 20% 24% 20%
Residential 24% 24% 0%
Business Asset Disposal Relief
The lifetime limit will remain at £1 million.
From the 6 April 2025 rates will increase from 10% to 14%.
From the 6 April 2026 rates will increase again to 18%.
Employer NI Contributions
The main rate of employers NI will increase to 15%.
The lower earnings rate which employers NI is payable will fall from £9,100 to £5,00 resulting in an additional employers NI liability of £615 per employee for those earning over £9,100.
This will be partly offset by the employment allowance increasing from £5,000 to £10,500.
What didn't change?
CGT uplift on death
One thing expected was that the CGT uplift on death, which gave an extra tax benefit to assets qualifying for either APR or BPR, was not abolished.
That said in order to qualify for the CGT uplift now, you will need to hold the asset till death, potentially exposing it to IHT on value over £1 million.
Gift or holdover relief appears intact
Gifts during lifetime can still qualify for CGT holdover relief in qualifying. This covers most agricultural land and potentially development land if held in the business, along with capital in partnerships or shares in trading companies.
Some assets might be excluded from holdover relief.
Potential things to consider
- Should any potential sales be accelerated to take advantage of the current BADR rate of 10%?
- Should gifts be made earlier during lifetime to start the seven year potentially exempt transfer clock?
- Will the restricted APR/BPR still cover all assets so no action needs to be taken?
- Is it time to ascertain ownership and values of all assets?
- Is there an opportunity to change partnership agreements to restrict value to net book value?
- Should wills be amended to ensure you don't lose £1 million APR/BPR?
- Is appropriate life cover in place?
To discuss any of these issues in detail please contact rob@doddaccountants.co.uk
