Fears realised as APR targeted in new budget

Ms Reeves expressed her intent to protect small family farms, noting that three-quarters of agricultural land would remain unaffected by the upcoming changes.

She confirmed the extension of the inheritance tax threshold freeze until 2030.

Under the new guidelines, APR will continue to apply to the first £1 million of combined business and agricultural assets, ensuring these remain exempt from IHT.

However, assets exceeding this threshold will be subject to IHT, with a 50% relief in place starting in April 2026.

The government has confirmed it will reform agricultural property relief, despite industry warnings.

Addressing the Common’s Ms Reeves said: “We will reform agricultural property relief and business property relief. From April 2026, the first £1m of combined business and agricultural assets will continue to attract no inheritance tax at all, but for assets over £1m, inheritance tax will apply with 50% relief, at an effective rate of 20%.”

Before the election, Defra secretary Steve Reed stated there would be no changes to APR, reinforcing the sector's expectations of support within Labour’s maiden budget.

This change will increase tax burdens for farmers, complicating estate planning and hampering the transfer of agricultural businesses to future generations.

The IHT thresholds will remain frozen until 2030, extending the freeze by two years, which may subject more estates to taxation as property values rise.

In a related commitment, the government has decided to maintain the farming budget at £2.4 billion for 2025/26, aiming to provide some stability amidst the proposed tax changes. This move means the farming budget has remained at a constant since 2014.

Industry leaders had called upon the chancellor to increase the agriculture budget to £5.6bn in the lead up to the autumn budget.

Following the announcement, NFU president Tom Bradshaw said: “This Budget not only threatens family farms but will also make producing food more expensive. This means more cost for farmers who simply cannot absorb it, and it will have to be borne by someone. Farmers are down to the bone and gristle, who is going to carry these costs?

“It’s been a bad Budget for farm confidence, which is already at an all-time low. After today farmers, including tenants, have more uncertainty and more worry, not less."

Scotland’s overall budget, as announced by the Chancellor, has seen the block grant increased by £3.4bn.

The budget does include positive news for those affected by the severe rainfall earlier this year, as they will now have immediate access to the £60m Farm Recovery Fund, which has been increased by £10m.

Announcing Labour's first Budget for 14 years, Ms Reeves, the country's first female Chancellor emphasised that the only way to drive economic growth is to “invest, invest, invest.”

She had received calls from the rural sector to safeguard the agricultural budget and avoid changes to inheritance tax reliefs, including agricultural property relief (APR) and business property relief (BPR).

When questioned about government support for the agricultural industry during the pre-budget Prime Minister's Questions, Sir Keir Starmer stated that Labour would work to undo the wrongs of the previous government.