The 2025 Autumn Budget – What it means for rural businesses

Whilst the Government’s 2025 Autumn Budget did not deliver what many feared over the course of the prolonged period of speculation, there were several important developments that impact rural businesses, most noteworthy being:

The Government announced that the agricultural and business property (APR/BPR) allowance will be transferable between spouses or civil partners. This will make Will planning simpler. 

Following the budget, on 23 December, the Treasury also announced that the proposed £1M allowance will be increased to £2.5M per individual, effectively £5M including spouses or civil partners from April 2026. This means a farm of up to £5M can be passed on IHT free. The balance of qualifying assets will remain relievable at 50%, so effectively chargeable to IHT at 20%. This change follows sustained lobbying which will continue as we approach April 2026. 

Property-Related Measures 

The government announced several measures which will impact property owners, including:

• High Value Council Tax Surcharge 

For estates holding high-value residential property, the introduction of a “mansion tax” charge — an annual levy on properties worth £2M or more — has been confirmed for implementation in 2028. Formal consultation is expected early this year, including on how owners and tenants will be charged, what grounds of the house will be included, whether the state of the property will be considered as part of the valuation exercise and most importantly exemptions. Clearly there will be lobbying for exemptions for farmhouses and heritage property. 

• Income tax rate increase There will be a 2% increase to the rate of income tax on property income from April 2027. This will add to the continued increasing cost of letting property. Considering the timing of expenditure across 2025/26 - 2027/28, will be important. 

Business taxes With tax bands and thresholds frozen until April 2031, many more people will be pushed into higher and additional rates of income tax. Combined with an increase to the income tax rates on dividends – a 2% increase to basic and higher rates from April 2026 - the tax cost of running a business through a company will be higher. Careful consideration to the timing of dividends will be important before 5 April. 

Further, the government announced a 4.1% increase in the national minimum wage/national living wage to £12.71 which results in the minimum wage now costing an employer £27,752 a year, up from £26,631 a year. The 8.5% increase in rates payable to 18-20 year olds may impact on the decision to take on younger employees. 

The government will reduce the main rate writing down allowance from 18% to 14% per year from April 2026. 

For expenditure incurred on or after 1 January 2026, the government will introduce a new first year allowance (FYA) of 40% for all businesses on main rate assets. Cars and second-hand assets will not be eligible. 

The annual investment allowance (AIA) continues to provide a 100% write-off on certain types of plant and machinery for expenditure of up to £1M per 12-month period. Therefore, the FYA will only benefit those spending more than the AIA. 

Generally, there really wasn’t much in the Budget for businesses to aid growth, which continues to be disappointing