Despite having a reputation as something of an Iron Chancellor, Chancellor Rachel Reeves has shown surprising signs of flexibility lately. A few days before Christmas the government sneaked out news that they would raise Inheritance Tax (IHT) thresholds for farmers and business owners. Following that, the Treasury has indicated that it will reverse course on business rates for pubs.
Here we look at the changes to previous announcements and consider if Ms Reeves will address other pain points for business in this year’s Spring Forecast Statement.
Christmas cheer
Changes to the level of the Agricultural Property Relief (APR) and Business Property Relief (BPR) thresholds were a welcome Christmas gift for farmers and business owners. News that the thresholds will be increased from £1 million to £2.5 million followed months of protests and lobbying by those affected.
The change will allow spouses or civil partners to pass on up to £5 million in qualifying agricultural or business assets between them before paying IHT, on top of existing allowances.
At the 2024 Autumn Budget, Ms Reeves had announced reforms to APR and BPR. This reduced the highest rate of relief to 100% for the first £1 million of combined business and agricultural assets, causing consternation amongst farming and business groups.
Listened to concerns
The government says the recent changes come after it listened to concerns of the farming community and businesses about the reforms.
It says it will protect more farms and businesses, while maintaining the core principle that the most valuable agricultural and business assets should not receive unlimited relief.
The change will be introduced to the Finance Bill in January and will apply from 6 April.
Heart of food security
Emma Reynolds, the Environment Secretary, 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.
‘It’s only right that larger estates contribute more, while we back the farms and trading businesses that are the backbone of Britain’s rural communities.’
Relief for pubs
The action on IHT is set to be followed by a reversal of forthcoming increases to the business rates bills faced by pubs in England.
Treasury officials say they have recognised the financial difficulties facing many pubs after sharp rises in the rateable value of their premises.
The move follows pressure from landlords and industry groups that included hundreds of pubs barring Labour MPs.
In last year’s Autumn Budget, Ms Reeves scaled back business rate discounts that have been in force since the pandemic from 75% to 40%. That change, combined with big upwardadjustments to rateable values of pub premises, left landlords with the prospect of much higher rates bills.
Struggle and support
Anna Turley, Chair of the Labour Party, said: ‘Where businesses are telling us they are struggling and they need more support it is absolutely right that the Chancellor talks to them, engages with the sector and looks at what we can do to assist them.’
Business rates will increase sharply over the next three years as Covid-era support is phased out and property values are adjusted to reflect a return to normal business, post-pandemic.
However, according to media reports, the assistance will apply only to pubs and not the whole sector. This has caused retailers and hoteliers to question why they should not be given the same relief.
NIC pain
These changes give hope to employers, retirement savers and others that have been caused headaches by the Chancellor’s policies. There is now the possibility these could be altered at the Spring Statement 2026 on 3 March.
In her first Budget as Chancellor, Ms Reeves announced an increase to the rate of employer National Insurance contributions (NICs) by 1.2 percentage points to 15% from 6 April 2025. However, the Secondary Threshold – the level at which employers become liable to pay NICs on each employee’s salary – reduced from £9,100 per year to £5,000 per year.
This has since been criticised as a ‘tax on jobs’ with a quarter of a million jobs lost in the six months following that Budget. Meanwhile, the British Chambers of Commerce (BCC) says the increase in employer NICs triggered a fall in business confidence and helped to drive up prices for consumers.
Salary sacrifice warnings
In the last Reeves Budget, the Chancellor caused angst amongst pension savers and retirement professionals alike.
She announced that from April 2029, the government will charge employee and employer NICs on any pension contributions made via salary sacrifice above £2,000 a year.
However, the Society of Pension Professionals (SPP) has warned that restricting salary sacrifice for pension contributions is likely to increase costs for employers and employees and reduce levels of pension saving.
The SPP warned that the restriction comes at a time when government data already shows 15 million people are not saving enough for an adequate retirement.
This Spring
The Spring Forecast Statement on 3 March gives the Chancellor another opportunity to address these issues. Will we see the Iron Chancellor refuse to bend or will Ms Reeves show her flexible side once more?
Whatever the Spring Forecast Statement brings, Mercia’s tax experts will be watching and will provide detailed analysis of the government’s fiscal announcements. Keep your clients up to date with our range of digital products.