UK land sector warns business will be disrupted by budget tax changes

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Some historic home and land owners in England have warned that tax changes in the Rachel Reeves Budget will wipe out the farming and heritage businesses they run.

In his first fiscal event last week, the Prime Minister raised rates and lowered employers' national insurance premiums.

She also reformed Agricultural Property Relief (APR) and Business Property Relief (BPR). This means that from April 2026, estates that were previously exempt will pay inheritance tax at 20% on assets exceeding $1 million.

Edward Stanley, 19th Earl of Derby, who lives at Knowsley Hall, a mansion near Liverpool in northwestern England, said the measures announced by Reeves would affect him as an employer and owner.

He said taking away 20% of businesses every generation is just an incredibly terrible concept for a government that wants to grow.

Owned by the Stanley family since 1385, Knowsley Hall is available to hire for holidays, weddings and photography. The ancestral home also has a 550-acre safari with rhinos and baboons and a stallion for racehorse rides.

Stanley said it would kill the farming business and the legacy business, adding that heirs would be faced with the choice of selling the land, making the farm less viable, or selling the house and its contents.

The Earl and Countess of Derby at Knowsley Hall

Stanley cited Treasury figures showing that the APR and BPR changes would generate approximately $500 million in revenue each year from 2027-28 to 2029-30. NI changes are expected to increase by $24.2 billion to $25.7 billion per year over the same period.

Analysis of data published by the Office for National Statistics by consultancy Cebr found that the UK's cultural heritage sector contributed $44.9 billion in total value added to the UK economy in 2022 and supported the employment of more than 523,000 workers.

James Hervey-Bathurst, who inherited Eastnor Castle, in Herefordshire, near the Welsh border, from his mother in 1988, said his family would need to anticipate inheritance tax and allocate cash to pay the tax that would go towards the business.

Hervey-Bathurst opens Eastnor, built in 1812, for weddings, film shoots and corporate rentals.

“What the government needs to recognize is that we pay a lot of taxes, including NI and VAT,” he added. These are all things that houses could not produce 50 years ago because they did not follow the business path, but they are all produced now.

Historic Houses, which represents more than 1,000 independently owned and operated houses, castles and gardens in the UK, said its members were effectively asset-rich but cash-poor rural small businesses.

Eastnor Castle in Herefordshire Neil Bussey/Dreamstime

The proposed changes to APR and BPR, which were introduced relatively unannounced, would cause major disruption to existing succession planning, he added.

Lawyers have suggested that there are ways to mitigate estate taxes, such as gifting the estate to the next generation or taking out life insurance to cover the amount.

Michael Parkinson, consultant at law firm Payne Hicks Beach, said: There is a bit of hysteria going around right now regarding APRs. Even if the rules change, there is still plenty of scope for lifelong planning.

But Hervey-Bathurst said there was no way his life insurance would cover inheritance tax at 20%, meaning his family would have to liquidate some of their assets.

Richard King, a partner at agricultural consultancy The Andersons Centre, said real estate giants would suffer from Reeves' tax changes. Unlike investor-landlords who contract land to farmers or for environmental initiatives such as tree planting, large property owners cannot jump in and out in the same way. They will not sell agricultural land that is part of their inheritance, he said.

The Treasury said a couple owning a farm could inherit up to $3 million without paying inheritance tax, with 40 per cent of the APR going to the wealthiest 7 per cent of claimants. [so] We have made difficult decisions to ensure that our relief is financially sustainable.

Additional reporting by Madeleine Speed

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