UK Government policies continue to stifle rural growth in Wales after no changes to inheritance tax reliefs announced, says CLA Cymru
The unique challenges facing rural businesses across Wales continue to be overlooked by the UK Government, says CLA Cymru, following Chancellor John Healey’s Budget.
Despite repeated CLA calls to scrap the detrimental inheritance tax changes, no further adjustments were announced. The Office for Budget Responsibility has already noted that the forecast revenue from these measures is particularly uncertain given the behavioural response.
The Chancellor says he wants growth in every postcode, but once again, the challenges rural areas face have been overlooked.
There are too many policies that stifle growth and entrepreneurship in the countryside, and there is still an ignorance of the unique difficulty of running a rural business.
We welcome the extension to the red diesel tax cut and the increase in the business rates threshold. However, at a time when 9 out of 10 CLA members are cancelling investment in their business, it is hard to see what in this Budget will change their mind.
The Budget
Red diesel tax cut
The temporary reduction of 3.7p per litre in red diesel duty has been extended for a further six months, matching the 5p cut to the main fuel duty rate. Both temporary cuts are due to end on 1 July 2027, after which the normal rates will apply and be uprated in line with the retail prices index.
What this means for Wales
Welsh members will be relieved that the temporary reduction in red diesel duty (and the main fuel duty cut) is a UK-wide measure set by the UK Government through HMRC. Fuel duties are not devolved, so the extension until 1 July 2027 applies in Wales exactly as announced. This matters for farmers, contractors and rural businesses that rely heavily on red diesel across the hills, valleys and roads across Wales.
Tax rates on income from property
A further two percentage point increase in the income tax rates applying to property and savings income will take effect from 6 April 2027. Combined with the earlier announcement, rates on property income will stand four percentage points higher than in the current tax year. From 2027/28 the basic rate will be 24%, the higher rate 44% and the additional rate 49%.
This will affect rural landlords and landowners who receive residential or commercial rental income, including holiday lets, as individuals or through partnerships.
What this means for Wales
The increased rates on property income apply to individuals in England, Wales and Northern Ireland as announced. Welsh Rates of Income Tax cover only non-savings, non-dividend income, so property income continues to be taxed at the UK rates unless the Welsh Government later uses its new power to set different property rates.
Business Asset Disposal Relief
The lifetime limit for gains qualifying for Business Asset Disposal Relief will fall from £1 million to £500,000 for disposals on or after 6 April 2027. The relief rate remains 18%.
This change risks affecting retiring farmers, partners and rural business owners who sell or transfer their business, a partnership interest or shares in a qualifying trading company. For an individual realising a qualifying gain of at least £1 million who has not previously used any lifetime allowance, the reduction could raise the capital gains tax bill by up to £30,000.
What this means for Wales
Business Asset Disposal Relief is a Capital Gains Tax relief. Capital Gains Tax is a reserved UK-wide tax and has not been devolved to the Welsh Government, so the reduction in the lifetime limit from £1 million to £500,000 for disposals on or after 6 April 2027 applies equally in Wales as in the rest of the UK.
CLA Cymru members thinking about retirement, succession or disposal should review the timing of any transaction carefully and take professional advice.
Increased threshold for small business rate relief
From April 2027 the threshold for 100% small business rate relief for retail, leisure and hospitality businesses rises from £12,000 to £18,000, with tapering up to £21,000. Business rates for these sectors are also frozen for two years from April 2027.
The increase falls short of the £20,000 sought by the CLA and only restores the threshold roughly in line with inflation since 2017. The narrow taper still leaves a cliff edge at revaluation. The freeze offers short-term certainty, yet many businesses have already faced higher bills this year while trading conditions remain tough.
What this means for Wales
Business rates are a devolved matter for Welsh Government, so the UK Budget changes will not apply automatically in Wales. Welsh Government has already set out plans for a permanent 30% reduction in rates bills for eligible hospitality and leisure properties with rateable values below £51,000 from April 2027, subject to Senedd approval. Attention will now focus on whether Welsh ministers introduce any further measures in response to the UK Budget.
CLA Cymru will continue to press for wider reliefs that recognise the full range of rural businesses that do not fall within the retail, leisure and hospitality definition
Biodiversity Net Gain exemption
A new exemption from Biodiversity Net Gain requirements for residential brownfield developments on sites up to 1.5 hectares was announced. Full details, including timing and the definition of previously developed land, are still to come. Land last used for agriculture or forestry is excluded from the “previously developed” category.
What this means for Wales
Biodiversity Net Gain is a mandatory planning requirement that applies only in England under the Environment Act 2021. Wales operates its own separate planning and environmental frameworks, so the new exemption for residential brownfield sites up to 1.5 hectares does not apply there.
National Living Wage to rise
The National Living Wage will increase by 3.9% to £13.21 an hour from April 2027.
This will increase take-home pay for eligible workers while raising employment costs for businesses that pay staff at or near the statutory minimum. Labour-intensive employers will need to assess the effect on payroll budgets and overall wage structures.
What this means for Wales
The rise applies across the UK and will affect Welsh employers directly. Businesses with relatively high staffing costs may face added financial pressure, especially where higher wages cannot readily be passed on to customers.
CLA Cymru members who employ workers should build the new rates into their recruitment, pricing and workforce planning for 2027 onwards.
Consequential money and what this means for Wales
Consequential funding, or ‘consequentials’, is the extra money allocated to Welsh Government when the UK Government announces spending that applies only in England. This funding is provided in place of the England-only measure.
In most cases, consequentials come with no requirement as to how the money must be used, leaving Welsh Government free to decide. However, following the UK Government’s announcement of the £100 energy payment for households in England in council tax bands A to D, Welsh Government has since said it will introduce the same payment using the consequential funding it has received.
The Chancellor talks of growth in every postcode, yet the distinct pressures facing rural businesses in Wales have once again been sidelined. Farms, estates and diversified rural enterprises here operate under unique conditions of terrain, weather, markets and infrastructure. Too many policies continue to hold back investment, succession planning and entrepreneurship across the Wales.
We welcome the extension of the red diesel duty cut, which will ease costs for farmers, contractors and other fuel-dependent businesses. However, with so many of our members already postponing or cancelling planned investment, it is hard to see what in this Budget will restore the confidence needed for long-term growth. CLA Cymru will keep pressing both the UK Government and Welsh Government for policies that properly recognise the contribution of rural Wales.
