The Scottish Government's budget allocation raises questions about the future of farming amidst UK tax reforms.
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The recent Scottish budget has sparked a wave of discussions within the agriculture sector, highlighting both support and challenges that farmers and crofters face. With an allocation of approximately £680 million for farming and crofting in 2025-26, the Scottish Government aims to bolster rural communities and enhance food production.
However, the backdrop of proposed UK inheritance tax reforms has left many in the industry feeling uncertain about their future.
Financial support for farmers and crofters
The Scottish Government has committed to investing over £660 million to support farmers, crofters, and land managers.
This includes direct payments and a new £20 million transformation scheme aimed at modernizing agricultural practices. The Agri-Environment Scheme will continue to provide essential funding, encouraging sustainable practices that reduce emissions and promote biodiversity.
Despite these positive measures, industry leaders express concern about the real value of this funding. Rising costs in agriculture mean that even with the budget allocation, farmers may find themselves in a precarious financial situation. Martin Kennedy, president of the National Farmers’ Union Scotland (NFUS), emphasized the need for a budget that truly reflects the vital role of agriculture in Scotland’s economy.
Concerns over inheritance tax reforms
Compounding the challenges faced by the agricultural sector are the proposed changes to inheritance tax by the UK Government. A recent motion in the House of Commons aimed to overturn these controversial reforms, which critics argue could devastate family farms. The motion was defeated, highlighting a divide in political support for the agricultural community.
Critics, including Conservative MP Harriet Cross, have voiced strong opposition to the so-called “family farm tax,” warning that it threatens the livelihoods of farmers and could lead to a significant loss of agricultural businesses. The proposed tax changes, set to take effect in April 2026, would impose a 20% tax on inheritable property and business assets exceeding £1 million, with estimates suggesting that up to 75,000 farm business owners could be affected.
The future of Scottish agriculture
As the Scottish Government navigates its budgetary priorities, the agriculture sector remains in a state of flux. While the allocation of funds is a step in the right direction, the lack of a real terms increase in funding raises questions about long-term sustainability. Industry leaders are calling for a more stable financial framework that allows farmers to plan for the future without the fear of annual budget battles.
With the looming threat of inheritance tax reforms, the agricultural community is at a crossroads. The need for a cohesive strategy that supports both immediate financial needs and long-term viability is more critical than ever. As discussions continue, the voices of farmers and crofters must be heard to ensure that the future of Scottish agriculture remains bright.
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