What did Rachel Reeves announce in the 2025 Budget?
26th November 2025
Following devastating reforms to inheritance tax in last year’s Budget, farmers have awaited Rachel Reeves’ 2025 Budget with trepidation. We take a look at what she announced in today’s speech.
After months of concern and speculation over what this year’s Budget will hold for farmers – and whether the government will row back on inheritance tax reforms, the chancellor finally delivered her speech in the House of Commons today – nearly a month later than last year.
In an unprecedented scenario, details of the Budget were leaked by the Office for Budget Responsibility (OBR) 30 minutes prior to the chancellor’s speech.
The OBR apologised for the ‘technical error’ and launched an investigation to ensure it does not occur again.
The leak revealed that the tax burden is set to reach a record high of 38% of GDP in 2030-31.
As Reeves shared her Budget for the year, tractors appeared in Whitehall to protest against the IHT reforms, despite the Met Police earlier announcing a ban on agricultural machinery in the area today.
Tax increases
The Budget raises taxes by £26Bn in 2029-30, including the following tax rises:
- A new mileage tax for electric vehicles from April 2028, equalling £0.03/mile for battery electric cards and £0.015 per mile for plug-in hybrid cars. The rate per mile will increase annually with CPI
- Salary sacrifice pension contributions above £2,000 will face National Insurance from April 2029
- New ‘mansion tax’ – £2,500 annual tax on properties worth more than £2m, and £7,500 for those worth more than £5m
- Reduced capital gains tax relief on disposals to employee ownership trusts
- Staged increases to fuel duty from 2026, partially offset by a freeze to fuel duty for a further five months
- Writing down allowance main rate in corporation tax reduced
- Tax rates increased by 2 percentage points on dividends, property and savings income
- Tax thresholds on personal tax and employer National Insurance contributions frozen for three years from 2028-29, a year longer than forecast, which Reeves accepts will impact working people.
However, inflation will drop 0.4% next year.
The government will also introduce “permanently lower taxes” for retail, hospitality, and leisure properties – paid for through higher rates on properties worth £500,000 or more, such as warehouses belonging to online retail giants.
But the eco energy scheme introduced by the Conservatives to tackle fuel poverty has been scrapped, saying that for most families it has cost more than it has saved.
READ MORE: Budget day: Farmers try to drive tractors to Whitehall despite ban
READ MORE: Rachel Reeves’s pre-Budget speech ridiculed by the opposition
READ MORE: What does the Budget really mean for farming?
Inheritance tax
Despite months of speculation that the government will row back on last year’s hammer blow reforms to agricultural property relief, Reeves did not address this in her speech.
However, she did reveal that compensation payments for the Infected Blood Scheme were exempted from inheritance tax. “That is how we should be spending taxpayers’ money” on dealing with injustices, she said.
In last year’s Budget the chancellor announced reforms to agricultural property relief (APR) and business property relief (BPR), which are set to come into force from April 2026.
From this date, the first £1m of combined business and agricultural assets will continue to attract no inheritance tax. But, for assets over £1m, inheritance tax will apply with 50% relief, meaning an effective 20% tax.
A number of other unpopular measures were also introduced, including a “stealth tax” on double cab pick-ups; an accelerated phase out of direct payments; a capital gains tax increase; and a carbon tax on imported fertiliser.
Increases to minimum wage and employer national insurance contributions also had knock on impacts for agricultural businesses.
