Rural Update: Inheritance Tax debate deepens
Your weekly dose of news, views and insight from Knight Frank on the world of farming, food and landownership
11 minutes to read
Viewpoint
Farmers, their representatives, advisors, and even their customers have all told Chancellor Rachel Reeves in no uncertain terms that her reforms of Inheritance Tax (IHT) are unfair, misguided and counterproductive. Now, even the government’s own MPs are telling it to think again.
With admirable understatement, the latest report from Parliament’s Environment, Food and Rural Affairs Committee (EFRA) states: “Stakeholder concerns about the Budget’s taxation proposals have made it difficult for the government to articulate and deliver its wider vision (for farming).”
In reality, as indicated by the many farmer protests across the country, there has been a total breakdown of trust in the government and Defra; trust that is sorely needed at such a pivotal moment for the UK’s food and farming industry, not to mention energy security and the environment.
And the report’s damning conclusions are far from a hatchet job by the opposition. EFRA is dominated by Labour MPs, which hopefully means the government will take its conclusions more seriously.
It also needs to be made clear that the reforms to IHT don’t just affect farmers. They apply potentially to any family-owned business worth over £1 million. Given that family businesses employ around 14 million people, they are vital to the country’s prosperity.
If the government won’t listen to a committee of its own MPs, then farmers, landowners, and their lobby groups like the NFU and CLA need to work even more closely with small business representatives from other industries to highlight how damaging the IHT reforms will be to the country’s economy.
Sign up to receive this newsletter and other Knight Frank research directly in your inbox.
Commodity markets
Wheat forecast bearish
The USDA’s latest World Agricultural Supply and Demand Estimates (WASDE) paint a fairly bearish picture for the global wheat market over the 2025/2026 season. Production is set to hit a record of almost 809 million tonnes, with the EU contributing an extra 14 million tonnes. Although the forecast global consumption of 808 million tonnes closely matches this, year-end stocks are likely to be a healthy 266 million tonnes.
Wool hits high
Wool prices have hit a seven-year high off the back of strong global demand, reports British Wool. The organisation said the average auction price of £1/kg was 18p/kg higher than last season. However, with shearing costs up to £1.75 per sheep, most producers are still losing money on wool, reports Farmers Weekly.
The headlines
MPs slam family farm tax
The House of Commons’ Labour-dominated Environment, Food and Rural Affairs Committee (EFRA) has called for a delay in Chancellor Rachel Reeves’ controversial changes to Inheritance Tax (IHT).
The demand is included in a highly critical report from EFRA, which was published last Friday and analyses the progress made towards the government’s vision for farming.
Although the report accepts the need to reform the Agricultural Property Relief (APR) and Business Property Relief (BPR) regimes to prevent “wealthy investors” from buying farmland to avoid paying IHT, it says the changes were announced without proper consultation or impact or affordability assessments.
This means the changes could have negative unintended consequences on family farms, tenants, food security and farms in the devolved administrations, concludes the committee.
It says that the government should delay announcing its final APR and BPR reforms until October 2026, which would give it time to properly assess the alternatives put forward by the industry and develop a better tax policy. The changes could then be introduced in April 2027.
The report also criticises Defra for the way it abruptly closed the Sustainable Farming Incentive (SFI) and Capital Grants schemes. It says this follows a pattern within Defra of poor communication and late decision-making. “Lessons must be learned from this failure of communication,” it urges.
EU trade deal struck
A new trade deal with the EU that was announced by Keir Starmer yesterday (19 May) could be good news for food producers and shoppers.
As part of the deal, which the government says marks the start of a “reset” of the UK’s relationship with Europe, both parties have agreed to work towards common sanitary and phytosanitary standards.
Sir Keir claimed this would lead to a significant relaxation of the red tape that is currently restricting the cross-channel movement of food and agricultural products, which could potentially cut food prices.
However, there could be unwelcome pressure on the UK to reverse its decision to allow the use of gene-edited crops, which are still banned in the EU.
News in brief
UK peat mapped
Natural England has just launched new details of all England’s peat and peaty soils, 80% of which it claims are degraded. The environmental quango says The England Peat Map will be a key resource for government, conservation organisations, and anybody else working on the large-scale restoration of peatlands or the ecosystem services they provide.
New northern nature reserve
Meanwhile, the location of the country’s newest National Nature Reserve has also just been confirmed. The 1,272-hectare Bradford Pennine Gateway National Nature Reserve, which covers the landscapes that inspired the novels of the Bronte sisters, is the first of its kind in West Yorkshire and will link eight nature sites within the Bradford and South Pennines area, two of which are internationally important upland habitats.
Carbon credit bonanza
The current demand projections for carbon credits in the UK could help create 135,000 high-skilled jobs within the next decade, generating £1 billion in tax revenues by 2035, according to new research from BeZero Carbon, a carbon-credit rating agency. Over half the jobs would probably be in nature-based carbon projects, including ecologists, farmers, foresters, and rangers, the report says.
Welsh carbon budget ire
Welsh farmers, however, have reacted angrily to the UK Climate Change Commission’s fourth carbon budget for Wales, which calls on them to cut beef and sheep numbers by 19% by 2033 and plant more trees. NFU Cymru President Aled Jones said: “The report does not acknowledge the multi-faceted benefits of livestock farming to Wales’ environment and biodiversity, nor does it truly reflect the detrimental impacts such destocking would have on tens of thousands of jobs on farm and the many more in the £9 billion Welsh food and drink sector, our rural communities, culture, landscape and the Welsh language, or the offshoring of production.”
Avian flu rules relaxed
Poultry owners can now start to bring their flocks outside following the lifting of the national avian influenza prevention zone (AIPZ) housing measures last week. Birds must still be housed if they are in a protection zone or a captive bird (monitoring) controlled zone. All keepers must continue to follow strict biosecurity measures, warns Defra.
F&M controls eased
Following an outbreak earlier in the year, the UK government has officially recognised Germany as being free from foot and mouth disease. The restrictions applied to imports of affected commodities from the containment zone in Germany have now been lifted. However, travellers are still not permitted to bring meat and dairy products into the UK, although farmers allege that the restrictions are not being policed at the border.
Bluetongue zone extended
Although the UK is now in a low-risk period of vector transmission, when the midges that transmit bluetongue to livestock are active but unlikely to be infectious, the restricted zone and infected area for the disease was extended last week to include Lancashire and the remainder of North Yorkshire, following the identification of historic cases in cattle.
Cocoa climate collapse
Dire warnings about the impact of climate change are not new, but the latest prediction will be of serious concern for chocolate lovers. According to a report in The Ecologist magazine, cocoa yields in West Africa, where most of the world’s cocoa is grown by smallholders, could collapse by 2030 if no action is taken. Wetter weather and over-intensification have led to a surge in the number of disease-affected crops. Climate change also presents a severe threat to global banana production, claims a new report from Christian Aid.
US farmers trump Trump
Meanwhile, the US Agriculture Department has been forced to restore information about climate change that was scrubbed from its website when President Trump took office, following legal action from farmers, according to the New York Times. The deleted data included pages on federal funding and loans, forest conservation, rural clean energy projects and detailed maps showing how climate change might affect national forests and grasslands.
Knight Frank - Out and about
Landlord/tenant podcast
Alastair Paul, who heads up our Eastern Rural Consultancy team, has long championed the benefits of improving the often-strained relationship between rural landlords and their tenants. It’s no surprise, therefore, that leading law firm Foot Anstey invited him onto its popular podcast series to discuss the Agricultural Landlord and Tenant Code of Practice. You can listen to the podcast here.
Devon County Show
John Williams of our South-west Rural Consultancy team shared his views on the farming sector at the CLA’s annual political breakfast at the Devon County Show. Defra Minister Steve Reed was scheduled to be grilled by guests, but withdrew and was replaced by Shadow Minister Lord Roborough. John reports considerable uncertainty among those attending, particularly regarding Inheritance Tax. “A lot of people still haven’t got their heads around what the changes mean for them.”
Sign up for Rural Report
The Spring/Summer 2025 edition of The Rural Report, Knight Frank’s flagship publication for rural businesses, which looks in more detail at many of the issues discussed in The Rural Update, is due to be published soon. To receive your copy, which includes the latest news, research and insights from Knight Frank’s rural property experts, as well as thought-provoking contributions from some of Britain’s most iconic estates, please sign up here.
Property of the week
Great estate
One of southern England’s most desirable sporting and agricultural estates, home to the famed South African F1 driver Jody Scheckter, has just come to the market. Set in 1,835 acres of rolling countryside, including 1,279 acres of organic farmland, The Laverstoke Park Estate, near Overton, Hampshire, has a distinguished history dating back to the 1500s. A sensitively restored Grade II-listed Palladian mansion lies at the heart of the estate, which also comes with 17 estate houses and two farmsteads that offer diversified income opportunities. In terms of country pursuits, there is a driven shoot and 1.5 miles of rare double-bank fishing on an upper stretch of the River Test. The estate is available in three lots. The guide price is £58 million. Please get in touch with Will Matthews for more information.
Discover more of the farms and estates on the market with Knight Frank
Property markets
Development land Q1 2025 – Market falls
The value of greenfield development land fell by 2% in the first quarter of the year. Urban brownfield sites, however, lost 5% of their value over the same period, according to the Knight Frank Residential Development Index. “Viability pressures and delivery risks continued to weigh on sentiment, with housebuilders citing persistent cost inflation and planning uncertainty,” points out researcher Oliver Knight, who compiled the index. “Urban brownfield and prime central London sites saw more downward pressure, driven by a widening viability gap, increased uncertainty linked to fire safety regulations, and reduced activity in the institutional and affordable housing markets,” he adds.
Farmland Q1 2025 – Values resilient
The farmland market in England and Wales is holding steady in the face of mounting sector pressures. Despite wider challenges across the agricultural sector and ongoing policy uncertainty, values have remained largely stable, underlining the market’s resilience.
The Knight Frank Farmland Index, which tracks the average price of bare agricultural land across England and Wales, showed a marginal drop of 1% in the first quarter of 2025 to £9,072/acre. This follows a similar small decline in the final three months of 2024, bringing the annual fall to just 1.9%.
Country houses Q1 2025 – Mixed picture
The average price of desirable homes in the countryside slipped by just 0.3% in the first quarter of the year, according to the Knight Frank Prime County House Index. Over the past 12 months, values have fallen by 1.6%. Expectations of an extra base-rate cut by the Bank of England this year could help steady markets, says Tom Bill, Knight Frank’s Head of UK Residential Research.
Development land Q4 2024 – Housing delivery down
Only 2% of the 50 housebuilders recently surveyed by Knight Frank believe that the sector will deliver the 300,000 new homes that the government is targeting for 2025. The gloomy prognosis is contained in the latest instalment of our Residential Development Land Index report, compiled by researcher Anna Ward, which reveals that the price of green and brownfield development land remained flat in the final quarter of the year, despite Labour’s ambitious housebuilding targets and planning reforms. Download the full report for more insight and data.