For many local businesses, inheritance tax reform and rising costs have triggered long-delayed decisions, Knight Frank said.
The National Land Agency said the past year was not defined by a single shock, but rather by a confluence of regulatory changes, market downturns and rising operating costs, which narrowed the room for companies to maneuver.
Delays themselves are increasingly a risk, the company’s consultants said, based on conversations with landowners, farmers and real estate agents across the country.
As pressures remain, ministers move to soften the impact of reforms dubbed the ‘Family Farm Tax’ by campaigners On Tuesday (December 23), family farmers announced that family farms will be able to transfer up to £2.5 million of eligible farming and business assets free of inheritance tax, following sustained pressure from the farming sector.
What emerged was not a sudden return of confidence, but a change in behavior. Feasibility is being reassessed, decisions are being made based on the current situation rather than facing unpleasant realities and waiting for reassurance that may never come.
This change has been most evident in succession planning, where inheritance tax has acted as a catalyst for discussions that many families have been putting off for years. Claire Whitfield, a partner at Knight Frank, said the policy change brought the issue to light.
“Of all the challenges around inheritance tax, what it really creates is the need for family conversations,” she says. “Some people had been putting off discussions about succession and what the future would look like, but this forced them to broach the subject.”
When these conversations begin, she said, they quickly move beyond ownership to tough questions about whether a business can truly survive without reliable support. “Farmers can no longer rely on the support they used to have,” she says. “They need to take a hard look at what works and what doesn’t for their business.”
A similar pragmatism is evident in the land and real estate market. Will Matthews, partner and head of farm and real estate sales at Knight Frank, spoke of a year that continued to function but lacked momentum. “We had enough transactions to get away with it for the most part, but we didn’t have any real customer churn,” he said.
With few owners under pressure to sell and little change in the buyer pool, pricing discipline is crucial. “If you trade at the right price, it will sell. If you’re still worried about Covid pricing, just sit back,” he said, adding that £11,000 to £12,000 an acre currently represents a good performance for high-quality arable land. Capital remains available, but the constraint is confidence, he said. “There is tremendous wealth out there. It’s not about money, it’s about emotion.”
Financial pressures are also changing the shape of advisory work. James Shepherd, partner at Knight Frank, said strategic portfolio reviews were on the rise in 2025, particularly among landlords concerned about cash flow, consolidation and future debt. “Customers are worried about costs they may not be able to fund in the future,” he said.
Once these reviews begin, decisions will move faster as data and digital tools become more focused. “Once data is on the table, the conversation changes immediately,” James said. “Instead of focusing on possibilities, you start focusing on priorities.”
Expectations regarding environmental markets are also being recalibrated. Mr James said hopes that natural capital would provide a financial safety net for agriculture were waning as development slowed and policy uncertainty continued.
“The idea that natural markets will save British agriculture is not happening,” he said, adding that such income would be most effective as a supplement rather than a foundation. “It should be a bonus and not the basis for decision-making.”
Rising regulations and employment costs add further complexity. Jess Waddington, a partner at Knight Frank, said housing reform had delivered results that were not necessarily consistent with policy intentions. “We are seeing examples where tenants want long-term security and the removal of fixed terms actually reduces their sense of security,” she says.
He added that the minimum wage and National Insurance increases were rapidly passing on to local businesses. “Increases in the minimum wage and National Insurance will have a huge impact on our clients’ businesses.”
The UK wine sector provides a compressed example of how quickly market dynamics can change when supply catches up with demand. Ed Mansell-Lewis, partner and viticultural director, said the surge in production has created a short-term oversupply as vineyards planted between 2015 and 2017 begin production in time for the 2023 harvest. Expansion plans were paused, but pressure also created opportunities.
“There is an emerging market for acquiring distressed companies,” he said, advising buyers to buy existing vineyards rather than plant new ones. “You don’t have to wait five years and the economics are much better.” Despite short-term tensions, he added that British sparkling wine now has an “undisputed international reputation.”
Looking ahead to 2026, Knight Frank said determination will increasingly be the difference between progress and stagnation. Claire Whitfield said local businesses must accept that external relief is unlikely. “The government is not going to save people,” she said.
The same pattern emerges across the consultancy’s rural operations. Companies maintain flexibility and control when difficult decisions are addressed early. If postponed, options will continue to narrow.
Knight Frank suggests that 2025 may be remembered as the year when waiting ceased to be a strategy.
