The Rural Update: The year ahead for farms and estates

Viewpoint

It wasn’t a complete U-turn, but the news delivered just in time for Christmas that the government was significantly raising the threshold for Inheritance Tax (IHT) on agricultural property to £2.5 million will have come as a profound relief for many farmers.

However, with the average value of farmland across England and Wales still close to £9,000/acre, according to the Knight Frank Farmland Index, many family farms will still be affected and will need to make plans to mitigate the changes if they haven’t done so already.

Despite the government saying the changes came about after ‘listening to farmers’, it would be optimistic to believe that they mark a step change in the administration’s attitude towards the countryside.

In reality, Keir Starmer’s political position is becoming ever more perilous, and even a relatively small rebellion by his MPs over the final legislation needed to ratify the new IHT rules could have been fatal for him.

That said, there are signs that 2026 could be more positive for food producers and rural property owners. We have listed some of the key areas to look out for below.

I’d like to take this opportunity to wish you a very Happy New Year. I hope you find the weekly Rural Update useful and thought-provoking. If my team and I can help with any of the issues raised, please do get in touch.

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Commodity markets 

Milk price gloom

The New Year hasn’t started well for dairy farmers, with more price cuts on the way. Müller and Arla, two of the UK’s biggest processors, have both cut their January prices for non-organic milk by over 3p/litre, citing an imbalance between supply and demand.

Oil prices sanguine

The first big news of 2026 was, of course, the audacious arrest of Venezuelan President Nicolás Maduro by US special forces and Donald Trump’s subsequent pledge that his administration would be involved in running the country and investing heavily in its oil infrastructure. Oil prices, however, remained relatively flat. Despite sitting on an estimated 17% of the world’s oil reserves, a lack of investment means Venezuela currently only pumps around 1% of global output. But if the US pulls off its plans to revive the country’s oil industry, analysts predict it could put downward pressure on prices over the longer term.

The headline

Starmer partial IHT U-turn

After over a year of unrelenting pressure from farmers, lobby groups, political opponents and even his own MPs, Keir Starmer was finally forced to amend Labour’s plans to reform the Inheritance Tax (IHT) treatment of agricultural and commercial property.

Just a few days before Christmas, it was announced that the threshold for paying IHT would be raised from £1 million to £2.5 million. For a married couple, those in a civil partnership, or those who have previously lost a spouse, this effectively means that £5 million of agricultural assets can be passed on without incurring an IHT bill.

Above that level, a reduced rate of Agricultural Property Relief (APR) and Business Property Relief (BPR) will still be available, meaning IHT will be levied at 20% instead of the standard 40%.

Making the announcement, Environment Secretary Emma Reynolds said: “Farmers are at the heart of our food security and environmental stewardship, and I am determined to work with them to secure a profitable future for British farming. We have listened closely to farmers across the country, and we are making changes today to protect more ordinary family farms.”

The new IHT rules will apply from 6 April.

The year ahead

A round-up of some of the big issues that could impact rural property owners over the next 12 months.

Farm profitability

Minette Batters’ Defra-commissioned Farming Profitability Review, published last month, offered a host of sensible suggestions that policymakers could adopt to boost the resilience of agriculture. The government has already announced the creation of a Farming and Food Partnership Board and proposed changes to the planning system that could be beneficial to farmers (see below). It says it will incorporate further responses into its 25-year Farming Roadmap, which is due out this year and will set out the long-term direction for farming. No doubt Baroness Batters will be on hand to review progress. 

Planning

If adopted, amendments to the Principle of Development proposed just before Christmas as part of a new draft National Planning Framework will require local planning authorities to give a default ‘yes’ to agricultural developments in rural areas, except in exceptional circumstances. This could be a game-changer for farms and landed estates.

Environmental support

The sudden closure of the Sustainable Farming Incentive (SFI) last year was a key contributor to the drop in farmers’ trust in the government. All eyes will be on the 2026 iteration of SFI, which Farming Minister Angela Eagle has suggested will be launched in April. However, Dame Angela has already warned that she wants it to be focused on smaller farms. This could be worrying for bigger businesses that already know they are going to be exposed to higher levels of Inheritance Tax.

Land use

Although the government launched a consultation on land use last January, with the publication of a Land Use Framework earmarked for July, nothing has yet appeared. Once it is finally published, a coherent land-use strategy could bring together food production, renewable energy, natural capital and housebuilding policy in a far more joined-up way. The fear is that it could be either over-prescriptive or lacking the vision for meaningful change.

Politics

With 40% of farmers claiming they would vote for Reform if a general election was held tomorrow, according to a Farmers Weekly poll, the outcome of the May local elections may well determine Keir Starmer’s future as Prime Minister. Whether a new leader would be more farmer-friendly is uncertain, but the unrelenting pressure that led to Sir Keir’s partial U-turn on Inheritance Tax would not be lost on them.

Trade

As part of the UK’s trade deal with the US, British farmers now have guaranteed access to a reciprocal 13,000-tonne beef quota. However, pressure from Donald Trump to relax our restrictions on the import of hormone-treated beef and chlorine-washed poultry in return for lucrative technology investments continues to mount.

Food and Health

A growing focus on the potential health risks of ultra-processed foods, including a new ban on junk-food advertising that kicked in yesterday (5 January), could help boost demand for meat, dairy, fruit and veg. However, the increasing use of weight-loss drugs – an estimated 1.5 million people in the UK now use them – could see demand for some foods fall. Some restaurants are already offering smaller portion sizes to lure back diners.

Renewable energy

Wind and solar continue to set new records for renewable energy generation in the UK. However, a new report from energy analyst Montel suggests that earnings per unit of power for renewable generators in the UK could fall by around 25% by 2030 as supply increases. This will focus more demand on the provision of battery storage facilities to better match supply with demand.

Rural Report out now

The Autumn Winter 25/26 edition of The Rural Report, Knight Frank’s thought-leading publication for rural property owners and their advisors, is available now. Full of insight from leading landed estates and our Rural Consultancy experts, it’s a must-read. To receive your copy, please sign up here.

Property of the week

Stunning equine facility

Fawley House Stud, high on the Lambourn Downs, could be the perfect late Christmas present for the horse lover in your life. The 123-acre property, near Wantage, Oxfordshire, which boasts a distinguished racing pedigree, includes 52 boxes and an indoor school. The main house is a stunning 10-bay, timber-framed, five-bed barn conversion. The guide price is £4.9 million. For more information, please contact Will Matthews.

Discover more of the farms and estates on the market with Knight Frank

Property markets Q3 2025 

Development land – Market hiatus

Greenfield and urban brownfield land values remained flat in Q3, according to the Knight Frank Residential Development Land Index, taking the annual price decline to 5%. At a national level, housebuilders are deferring many decisions until after the Autumn Budget, when reforms to taxation and planning may clarify the government’s policy direction. The prevailing uncertainty is likely to weigh on delivery for several quarters. Some 43% of respondents to Knight Frank’s survey of more than 60 small and volume housebuilders expect housing starts to fall through the fourth quarter of the year, while 45% expect land values to fall further.

Farmland – Prices dip

According to the Knight Frank Farmland Index, which tracks the value of bare agricultural land in England and Wales, the average price of land fell by just 1.6% to £8,719/acre over the third quarter of the year. That equates to an annual fall of 6.8%. As ever, the market remains highly localised, and where there is competitive bidding, prices have even been going up in some locations. Download the full report for more insight and data.

Country houses – Budget uncertainty

The average price of country houses has fallen by 5.4% so far this year, according to the Q3 edition of the Knight Frank Prime Country House Index. Properties worth below £1 million dropped by 4.7%, while those worth over £1 million lost 6.7% of their value. Owners of higher-priced properties are particularly concerned about any further property taxes being announced by Rachel Reeves as part of her Autumn 2025 Budget, which is due to be delivered at the end of November, points out Tom Bill, Head of UK Residential Research.

Read more of Tom’s numbers and insight.