The UK Budget was delivered by the Chancellor, John Healey, on 28 October 2026. Whilst there were no seismic changes in the Budget for rural landowners, there were still several measures that are likely to have an impact, including changes to capital allowances and tax relief on business disposals.
Importantly, the principal agricultural property relief and business property relief reforms that took effect on 6 April 2026 remain in place. The headline changes that will be outlined here are the changes to the rates of tax on property income and the approach to clean power.
With many rural landowners owning residential lets or cottages, a change to the rates of tax on property income is something that farmers and estate owners should be aware of going forward and take into account in their cash-flow and budgeting. From 6 April 2027, the government proposes to increase the basic, higher and additional rates of tax on property income to 24%, 44% and 49% respectively. This is a further 2% increase on the rates announced in the 2025 Budget, taking the total increase over the existing rates to 4%. It should be noted that rates of tax on property income are devolved to the Scottish Parliament so the effect on Scottish taxpayers is not yet known and they will have to wait and see if the Scottish Parliament follows suit in the Scottish Budget which is presently set for 3 December 2026.
Whilst this measure is not anticipated to have a significant impact on the economy overall, it may have an impact on landowners who own several let properties with an additional 4% on the rate of tax mounting up in some cases. With the rural sector already feeling the weight of pressure both financially and in respect of ongoing legal compliance associated with property rental, an increase to the rates of tax will be seen by many as an additional burden and something else that they will have to factor into their overall profit margins.
Many rural landowners rely on diversification to enhance the profitability of their enterprise, whether it be through the letting of properties or entering into renewable energy projects. One of the other key messages coming from the budget that could affect rural landowners looking to diversify into renewable energy is that the Chancellor stated that “this government will only buy and build new projects when they lower bills and when they can connect to the grid.” Only time will tell as to the implications of this new stance on clean power and renewables for rural landowners in remoter areas.
For more information or assistance, please get in touch with our rural business and tax teams or your usual Brodies contact.
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