Farmland values dip again as tax uncertainty slows the market

Farmland values across England and Wales continue to soften, with uncertainty over tax reform and the upcoming Budget weighing heavily on market activity.

The average price of bare agricultural land fell by 1.6% in the third quarter of 2025 to £8,719/acre, taking the annual decline to 6.8%, according to the latest Knight Frank Farmland Index.

Despite the slowdown, prices remain 24.5% higher than five years ago and more than double their level two decades ago, says Will Matthews, head of farms and estate sales at Knight Frank, although the market is at a near standstill.

Near standstill

By the end of September, around 90,000 acres had been publicly advertised for sale this year – only 10% more than during the same period in 2024. Few transactions are being completed as both buyers and sellers await clarity on fiscal policy.

“We largely find ourselves pretty much in the same place as this time last year, waiting for a Budget. Everyone’s hoping things can’t get any worse than last year, but a growing number are starting to worry that they possibly could.”

The slowdown follows last year’s announcement by Chancellor Rachel Reeves that Agricultural and Business Property Relief will be reformed from April 2026 – a move that prompted widespread concern among farm and estate owners.

Inheritance tax

Unless reversed, the changes could leave many heirs facing substantial inheritance-tax liabilities at a time when margins remain tight. But Mr Matthews says he has not had one phone call from somebody wanting to value their farm because of IHT.

“I know that land agents and lawyers are all pretty busy trying to get their clients’ ownership structures improved or passed on, ready for when the new inheritance tax reforms kick in next April.”

With Labour’s second Budget due on 26 November, landowners are braced for further fiscal tightening. However, the Conservatives have repeatedly insisted they will reverse the inheritance tax decision – if they win power.

Long-term averages

“Given that the polls suggest there is a very real chance Labour might not win the next General Election, a lot of farmers and estate owners will be hoping they can outlast the new tax.”

Despite the subdued mood, prices remain well above long-term averages. Some well-located arable and pasture parcels continue to attract competitive bidding. Any further softening early in 2026, it says, is likely to be short-lived.

“Farmland has historically followed a pattern of sharp price rises followed by more gradual downturns,” says Mr Matthews.  “There is a strong possibility that the IHT changes could be reversed after the next General Election, by which time farmers may well be feeling more confident again.”