The 2025 Budget Update: What's Changing For The Rural & Property Sectors?

The 2025 Budget brings a range of changes – some positive, some challenging – across the rural landscape. The full transferability of the £1 million APR and BPR bands between spouses is welcome and provides more flexibility for succession planning. However, increased minimum wages will put additional strain on farm businesses, especially those relying on seasonal or younger workers. Separately, the 2% property tax hike will further impact rural businesses that depend on income from property portfolios. In this environment, it is more important than ever to seek expert guidance to navigate these changes, proactively balance investment, compliance, and profitability, and ensure ongoing financial health.  

From a planning and development perspective, the introduction of faster approval paths for key facilities is significant. Landowners and developers should watch for zoning updates and engage early with councils to benefit from new opportunities.  

Detailed below are the key points which will matter most for our clients. These have been broken down into three groups:  

1. Farm Businesses
2. Landlords
3. Developers and Planning Authorities

For Farm Businesses

Inheritance Tax (IHT)

From April 2026, the full £1 million Agricultural Property Relief (APR) and Business Property Relief (BPR) bands will be transferable between spouses, with the allowance remaining frozen until April 2031. 

• Impact: This will provide greater flexibility in estate planning and helps families maximise inheritance tax relief. However, the freeze until April 2031 means the allowance will not increase with inflation, potentially reducing its real value over time. 

• Action: Review your estate plans to ensure you are making the most of the transferable reliefs before the freeze period ends. Seek professional advice to optimise inheritance tax mitigation strategies and account for the impact of inflation on future estate values. 

Anti–avoidance measures tighten rules around UK agricultural property held via non–UK entities. 

• Impact: Stricter anti-avoidance rules may limit the effectiveness of holding UK agricultural property through non-UK structures, potentially increasing the inheritance tax burden for some international arrangements and requiring greater transparency. 

• Action: Review ownership structures involving non-UK entities. Consult with legal and tax advisors to ensure compliance with the new rules and to adjust estate and succession planning as needed to avoid unexpected tax liabilities. 

Capital Allowances

The main rate for Writing Down Allowance (WDA) will be cut to 14% from April 2026, meaning slower tax relief on machinery and plant. But a new 40% First Year Allowance (FYA) will be introduced from January 2026, giving a bigger upfront deduction for qualifying investments. The £1 million Annual Investment Allowance (AIA) remains in place, so businesses can continue to claim 100% tax relief on qualifying plant and machinery investments up to this limit each year. 

• Impact: The reduction in the WDA rate will slow the pace of tax relief on machinery and plant purchases, while the introduction of the 40% FYA offers greater immediate deductions for qualifying investments, requiring careful timing and planning of capital expenditures. FYA will typically be used for assets that do not qualify for AIA, or where the AIA limit has already been used. 

• Action: Review and adjust your capital expenditure plans to take full advantage of the new FYA and optimise overall tax relief under the updated rules. You should claim AIA first, up to the £1 million limit, as it provides 100% relief. If your qualifying expenditure exceeds £1 million: You can claim FYA (40%) on the excess amount, and the remaining balance will be eligible for the standard WDA (14% from April 2026).

Pension Contributions

Starting in April 2029, National Insurance Contributions will be applied to salary-sacrificed pension contributions that exceed £2,000. 

• Impact: Employees and employers making pension contributions through salary sacrifice arrangements will face additional National Insurance costs on amounts exceeding £2,000. This could reduce the net benefit of salary sacrifice schemes, potentially affecting take-home pay and increasing employment costs for businesses. 

• Action: Review your pension contribution strategies and salary sacrifice arrangements to assess the financial implications. Consult with payroll and pension advisors to ensure compliance and optimise benefit structures, factoring in the new NIC charges from April 2029. 

Minimum Wage Increases

The National Living Wage will increase by 4.1% to £12.71 per hour, with rates for 18-20 year olds rising by 8.5% to £10.85 and rates for 16-17 year olds and apprentices increasing by 6% to £8.00. 

• Impact: The increase in minimum wage rates will raise labour costs for many farm businesses, especially those that employ seasonal and young workers, potentially impacting overall profitability and requiring adjustments to workforce planning and budgeting strategies. 

• Action: Review your staffing needs and labour budgets to factor in the increased wage rates, and consider revising employment practices or exploring efficiency measures to manage higher labour expenses effectively. It is also essential to accurately track and record the hours worked by each employee to ensure compliance with minimum wage regulations, avoid potential payroll discrepancies, and support transparent wage calculations. Implementing reliable timekeeping systems can help you monitor overtime, seasonal shifts, and ensure all staff receive the correct pay under the new wage structure.  

Business Rates

The 2026 revaluation will introduce lower multipliers and additional relief for retail, leisure, and hospitality properties. A three-year transitional relief scheme is also planned to help businesses adjust to these changes. 

• Impact: These measures will reduce immediate business rates liabilities for many affected sectors, supporting cash flow and providing targeted relief during the transition period. Businesses in retail, leisure, and hospitality stand to benefit from lower operating costs, but should be aware that transitional arrangements may phase in changes gradually rather than all at once. 

• Action: Review your property holdings and projected business rates to understand how the revaluation and relief measures will affect your finances. Consult with advisors to plan for the transitional period, ensuring you maximise available reliefs and adjust your budgeting strategies to reflect upcoming changes.

Defra Funding

There will be an extra £30 million for UK–EU trade implementation to support agricultural businesses. 

• Impact: Additional funding will provide agricultural businesses with greater resources to navigate post-Brexit trade arrangements. This may help reduce barriers, improve market access, and support compliance with new regulatory requirements, potentially enhancing competitiveness and stability in international markets. 

• Action: Stay informed about available support and funding opportunities. Engage with advisors to understand how these resources can benefit your business operations, and consider adapting your export strategies to take advantage of improved trade facilitation measures. 

Fuel Duty & Electric/Hybrid Vehicles

The freeze will remain in place for the time being, with gradual increases scheduled to begin in September 2026. Red diesel will remain unaffected. Additionally, a new electric vehicle (EV) road tax will be introduced at a rate of 3p per mile. For hybrid vehicles, a supplementary rate of 1.5p per mile will apply, increasing the total per-mile charge for those vehicles. These changes are intended to ensure that owners of both EVs and hybrids contribute to road maintenance funding as the shift away from traditional fuel taxes continues. The typical charge is estimated to be in the region of £250 per annum for an electric vehicle. 

• Impact: The temporary freeze on fuel duty continues to provide short-term cost stability for farm businesses and others that rely heavily on vehicles and machinery. However, as phased increases in fuel duty begin in September 2026, operating expenses for conventional vehicles will gradually rise, potentially impacting profitability and requiring adjustments in budgeting and operations. In addition, the introduction of a mileage-based road tax for EVs (3p per mile) and hybrids (4.5p per mile total) means owners and operators of these vehicles will also face new, ongoing costs. This may reduce some of the cost advantage previously enjoyed by EV and hybrid vehicles, and will require businesses to review the total cost of operating all vehicle types when planning fleet renewals or expansions.  

• Action: Regularly monitor both upcoming fuel duty changes and the implementation of new road taxes for EVs and hybrids to fully assess their impact on your business’s transportation and operating costs. Review your current and planned vehicle fleet composition, factoring in these new per-mile charges when considering the adoption of EVs or hybrids. Consider implementing fuel efficiency measures, updating fleet management strategies, and exploring alternative energy or low-emission vehicle options to mitigate increased expenses over the long term. 

Landfill Tax

The government has decided to maintain the lower landfill tax rate for inert waste, rather than merging it with the main rate – avoiding a significant cost increase for disposal. 

• Impact: Landowners with landfill sites will benefit from stable disposal costs for construction and remediation waste, supporting business viability. 

• Action: Review your site’s waste categorisation and ensure compliance to continue benefiting from the lower tax rate. 

E-Invoicing

From April 2029, all VAT invoices must be issued electronically. 

• Impact: The transition to mandatory electronic VAT invoicing means businesses will need to prepare for digital compliance and upgrade or adapt their accounting and invoicing systems to meet new requirements. This could involve investments in software, staff training, and process adjustments, potentially increasing administrative costs and requiring careful planning to avoid disruptions. 

• Action: Begin reviewing your current invoicing and accounting practices to identify gaps in digital capability. Consult with IT and tax professionals to select appropriate software solutions and ensure your systems are compatible with e-invoicing regulations. Develop an implementation timeline to train staff and test processes, ensuring you are fully compliant ahead of the April 2029 deadline. 

Sugar Tax

Soft Drinks Industry Levy: The levy now applies to milk-based drinks that contain added sugar, with the threshold set at 4.5%. 

• Impact: The extension of the levy may reduce demand for products from the dairy and sugar sectors. 

• Action: Review your product offerings and pricing strategies to anticipate potential changes in consumer demand and consider reformulating products to reduce added sugar where feasible. 

For Landlords

Property Income Tax

From April 2027, separate property income tax rates will be introduced to make the system “fairer”, as property income isn’t subject to National Insurance. For all property owned by individuals, trusts, Limited Liability Partnerships or unincorporated partnerships, an additional property income tax will be introduced, which raises the rate by 2 percentage points. Limited companies will not be subject to the rise. 

• Impact: Landlords and property owners will face higher tax bills on rental income. This change will likely reduce net returns and increase pressure on rental prices. The new rates are as follows:
  • Basic rate: 22% (was 20%)
  • Higher rate: 42% (was 40%)
  • Additional rate: 47% (was 45%) 

• Action: Conduct a thorough review of your property portfolio to assess how the new property income tax rates will affect your overall profitability and cash flow. Reevaluate your rental strategy in light of increased tax obligations – this may include considering rent adjustments or exploring alternative revenue streams. Proactively consult with a qualified tax advisor to gain a clear understanding of how these changes impact your income and total tax liability. Seek professional tax planning advice to identify potential reliefs, deductions, or structuring options that could help offset the higher rates. If adjustments to rents are necessary, communicate openly and early with your tenants to maintain positive relationships and ensure a smooth transition.

Income tax thresholds frozen until 2030–31, pulling more taxpayers into higher bands.

• Impact: As thresholds remain static, more property owners may move into higher tax brackets over time, increasing their tax liabilities. 

• Action: Monitor your income levels and plan for potential increases in your tax bill due to bracket creep. 

Council Tax Surcharge

Starting April 2028, properties valued above £2 million will be subject to new annual surcharges, beginning at £2,500 and rising to £7,500 for properties worth over £5 million. These charges are imposed on owners rather than occupiers, with potential reliefs and exemptions currently under government consultation. 

• Impact: Owners of high-value properties in the UK will face increased annual costs that may reduce investment returns and influence decisions regarding property retention, sale, or leasing. The financial burden and uncertainty around the details of reliefs or exemptions could affect the overall attractiveness and management of such assets. 

• Action: Assess your property holdings to determine the impact of these surcharges on your portfolio. Stay updated on the government’s consultation regarding reliefs and exemptions, and consult with advisors to optimise ownership structures and plan for the additional costs in your long-term property and investment strategies.

Tourism Tax

Mayors in England will have powers to introduce a visitor levy on overnight accommodation. 

• Impact: Businesses operating holiday lets could see increased costs for guests, potentially affecting occupancy rates and overall profitability. The levy may require adjustments to pricing strategies and could influence demand, especially in competitive markets. 

• Action: Review your holiday let pricing structure and business plans to account for possible visitor levies. Monitor local council decisions on the implementation of the levy and consult with advisors to ensure compliance and to minimise any negative impact on your operations.

E-Invoicing

See information in Farm Businesses section above. 

Business Rates

See information in Farm Businesses section above. 

For Developers & Planning Authorities

Planning Reforms

Planning reforms are accelerating major infrastructure development, increasing support and capacity for planning authorities, and revising planning policies to facilitate new housing. A “default yes” for development near well-connected rail stations and changes to statutory consultee requirements have been proposed. These proposals are to be consulted on before Christmas 2025, alongside a revised NPPF. 

• Impact: 
  • The fast-tracking of 150 major infrastructure planning decisions will reduce consenting times by 25%, moving from four years down to three, enabling quicker project delivery. 
  • The allocation of £48 million and the creation of 1,400 new planning roles will enhance planning capacity, allowing authorities to process applications more efficiently and handle increased project volumes. 
  • With around 80% of major residential appeals on grey belt land now being approved, developers have a significantly higher chance of securing permissions for such sites, potentially boosting housing supply and investment. 
• Action: 
  • Developers should identify and prioritise projects that could benefit from reduced consenting times and increased approval rates, especially for sites on grey belt land and near transport hubs. 
  • Planning authorities should leverage new resources and staff to streamline application processes and prepare for higher volumes of proposals. 
  • Stakeholders should review the updated NPPF to understand criteria for development in newly supported areas, and engage with local councils on project feasibility and compliance. 
  • Monitor ongoing infrastructure decisions and appeals to stay informed on approval trends and adjust project pipelines accordingly. 

Housing Supply & Infrastructure

England has set an ambitious target to build 1.5 million new homes, supported by a £39 billion Social and Affordable Homes Programme and a £16 billion National Housing Bank. The government is also committed to establishing at least three new towns, each offering more than 10,000 homes. In addition, over £120 billion in additional departmental capital investment is planned, alongside a £725 billion infrastructure pipeline over the next decade. 

• Impact: 
  • Developers will have significant opportunities for large-scale residential projects, benefiting from increased funding, streamlined planning, and expanded infrastructure. The scale of investment may drive competition, encourage innovation in construction, and boost housing supply. 
  • Local authorities will face increased pressure to deliver planning approvals efficiently and support infrastructure upgrades. The influx of projects may strain resources but also enable modernisation of local services and amenities. 
• Action: 
  • Developers should identify potential sites for new housing, engage early with local councils, and be prepared for large-scale projects to maximise the benefits of available funding and policy support. 
  • Local authorities should strengthen planning teams, streamline approval processes, and collaborate with developers to align infrastructure improvements with housing delivery. Engage with government programs to secure additional funding and resources for community development. 

Landfill Tax

Landfill tax rates will remain differentiated rather than converging, helping to keep disposal costs lower for construction and development projects. 

• Impact: Lower disposal costs may support project budgets, encourage responsible waste management practices, and make development projects more financially viable. However, developers and contractors should remain mindful of environmental regulations and potential future changes to tax policy. 

• Action: Review your waste management strategies to optimise cost savings under current landfill tax rates. Stay informed about legislative updates, and work with advisors to plan for any future shifts in tax policy that could affect disposal costs and project profitability. 

How we can help 

Preparing for upcoming regulatory changes and evolving tax policies can be complex, but our expert teams are here to guide you every step of the way. Whether you are a farmer, landowner, developer, or rural business operator, our specialists can help you assess risks, optimise strategies, and ensure compliance with the latest legislation.  

Speak to our farm consultancy team at contact@ceresrural.co.uk, our land consultancy team at land@ceresproperty.co.uk, or our planning consultancy team at planning@ceresproperty.co.uk to discuss how we can support your ambitions. Act now to position yourself for success and future-proof your assets and investments.