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With the headline changes to APR and BPR dominating discussions, it’s easy to overlook how many rural businesses are grappling with more than just the topline impact of these proposed changes.
Jack Deal, Business Advisory Partner explores two further issues adding complexity across the sector. Firstly, in the shape of increases in the cost of Employer’s National Insurance (NI) and the National Living Wage (NLW), both effective from 6 April 2025.
And secondly, whilst the changes have already led to a number of generational transfers of land and property, what happens if there’s a marital breakdown now or in the future? How can you make sure your farm is protected from all angles?
The Impact of the NI and NLW Changes
By way of a re-cap, from 6 April 2025 the rate of Employer’s National Insurance will increase from 13.8% to 15%, and the level of earnings at which Employer’s National Insurance is paid (per employee) will decrease from £9,100 to £5,000.
Meaning that for any full-time employees over the age of 21 on the National Minimum Wage, that’s an annual wage increase to be covered of over £1500, alongside a predicted rise in your employer NIC’s of £770*.
We spoke with David Kemp of Kemp Herbs, a family business growing a range of herb and salad produce in South Norfolk.
The business employs seasonal workers and has a higher number of employees than many neighbouring farms. David explained that they are budgeting for an additional £50k – £100k of cost for employing their people in 2025, compared to 2024.
‘The higher rate of National Insurance will hit us, but we’ll also be affected by the increase in the National Living Wage. Whilst we already pay our people above the rate of the National Living Wage, the increase raises the base line of what people expect to be paid, and we know we’ll have to pay more in order to compete for talent.
Like most farmers, we don’t control the price of our product so we have no choice but to absorb this cost and look for cost savings elsewhere in our business’.
David’s comments echo the feeling of many of our clients, particularly those that have diversified into the hospitality and retail sectors in recent years.
These sectors run at tight margins and employees are essential.
And whilst some businesses will be able to pass on increases in employment costs, some will be considering their models and hiring policies in light of them.
Considering Pre or Post-nuptial Agreements
Passing on a farm and property to the next generation is an easier decision for some landowners than others. For example, where there is a clear line of farming succession, and those successors are ready to take on the land and property.
But even where this is the case, it is important to consider how the farm is best protected from all angles. And an area often overlooked is the impact of marital breakdown.
Both pre-nuptial and post-nuptial agreements are becoming more and more popular in the UK. And whilst the conversation around them can sometimes be difficult, they are one of the most effective tools for protecting a farm against marital breakdown.
We’ve advised a number of businesses around land and property transfers prior to and since the October 2024 Budget.
And where land and property is passed down a generation, we’ve been recommending that the protections offered by Pre or Post nuptial agreements are also considered.
Because there are implications if a couple are married that could affect not only an immediate decision but also the long-term future of the farm and its successors.
A farm that’s been in the family for generations will not only have a financial value based on its assets but an emotional one too. Similarly, there’s often business structures like partnerships, tenancies and limited companies to navigate. And then there’s future inheritance, trusts and health to think about too.
This is an area where expert legal advice is essential. A pre/post nuptial agreement is not something to be entered into lightly, and aside from navigating the dynamics of the relationships concerned, it is crucial that legal advice is taken by all parties from the outset.
We suspect that Pre/Post nuptial agreements will become more and more popular in the UK as attitudes towards asset ownership evolve and, simply put, as more land and property is transferred by generations seeking to mitigate the impact of changes to the APR and BPR legislation.
It’s been well publicised that the October 2024 Budget was not kind to the rural sector and, whilst the changes to APR and BPR will continue to attract attention, I suspect we will start to see the real-time cost of the Budget in the coming months.
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