Business and Policy December 2025 – Management Matters: Autumn Budget

Autumn Budget 2025 

Tax and save – not tax and spend 

The Autumn Budget delivered by Chancellor Rachel Reeves places the emphasis firmly on raising revenue to restore fiscal sustainability.  While headline tax rates have not risen, the combination of tax threshold freezes and targeted increases to income from wealth means that most individuals and businesses will pay more tax over the coming years.  

While support for lower-income households featured in the speech, the practical effect of the Budget for farm businesses is one of higher labour costs, higher personal taxation, and tighter margins. Inflation is forecast to remain above 2% until 2027, with little move in interest rates expected.  

The Office for Budget Responsibility’s report explains the underlying challenge: with weaker expected productivity growth reducing projected tax receipts by around £16 bn in 2029-30, the Chancellor has been forced to lean on taxation rather than growth to balance the books. And although the Government will continue to meet its fiscal rules; it is only because tax revenues will rise by around £26 bn per year by 2029-30. 

From a Scottish perspective, further clarity will come from the Scottish Budget on 13 January 2026, particularly with regards to Income Tax and property taxation. 

 

Key measures affecting agriculture 

 

Inheritance Tax and Succession: 

• Agricultural Property Relief (APR) and Business Property Relief (BPR) reforms confirmed: first £1 million of agricultural/business assets remain fully relieved, with the portion above £1 m taxed at 20% effective rate. 

• The 2025 Autumn budget introduced a revision to the Inheritance Tax changes announced in the 2024 Budget whereby the £1 million allowance will be transferable between spouses/civil partners (including where first death occurred before 6 April 2026). 

• Nil-rate tax bands remain frozen until April 2031, meaning more estates will fall into IHT over time. 

 

Personal and Investment taxes: 

• Income Tax and National Insurance thresholds frozen until April 2031 — the main driver of increased tax for most working households. 

• There will be a 2% rise in tax levied on dividends and savings income. 

• The Cash ISA limit will be reduced to £12,000 from April 2027.  However, the current £20,000 limit will be retained for investors over 65 year of age. 

• From April 2029, salary-sacrifice pension contributions above £2,000 will be subject to employer and employee National Insurance Contributions (NICs). 

 

Capital Allowances and Investment: 

• The Annual Investment Allowance (AIA) of £1 m and full expensing remain available for most farm machinery investment. 

• From January 2026: there will be a new 40% First-Year Allowance for new main-rate plant and machinery not covered by AIA/full expensing. 

• From April 2026: the Writing-Down Allowance will be reduced from 18% to 14%. 

 

Employment costs: 

• From April 2025: the National Living Wage rises to £12.71 per hour for workers aged 21+ and to £10.85 per hour for 18–20 year olds. 

 

Other points to note: 

• Fuel duty expected to rise with inflation from April 2027, along with reversing the temporary 5 pence per litre cut. 

• Electric Vehicle Excise Duty (‘pay-per-mile’) from April 2028 for Electric Vehicles (EV )and plug-in hybrid vehicles. 

• From April 2027, HMRC VAT ‘digital prompts’ will be introduced.  This programme aims to reduce tax errors made by customers submitting tax returns by presenting prompts to taxpayers as they make submissions. 

• From April 2029, mandatory e-invoicing for VAT-registered businesses will be introduced. 

 

Overall, this was a revenue-raising Budget, and agriculture will feel that through higher wage costs, higher personal taxation, a less favourable tax position for capital purchases after 2026 and for some, potentially significantly higher inheritance tax liabilities.  However, there are also planning opportunities – particularly around succession, timing of machinery investment, and pension/remuneration strategies in advance of the full impact of the changes being made by 2029.  

Andrew Coalter, SAC Consulting, andrew.coalter@sac.co.uk