The new chancellor's first budget could have a "dramatic impact" on farmers and landowners, said one of East Anglia's leading rural finance experts.

Following Labour's election victory, Rachel Reeves is due to make her inaugural budget speech on October 30.

Prime minister Sir Keir Starmer has already warned the budget will be “painful” as he asked the country to “accept short-term pain for long-term good”.

And Chris Solt, agricultural partner at Norfolk-based accountancy firm Lovewell Blake, said a combination of factors could force the chancellor to introduce some "radical measures".

They include the need to plug a hole in the public finances, the manifesto commitment to deliver many more new homes, and a programme designed to stimulate economic growth.

Rachel Reeves, chancellor of the exchequer Rachel Reeves, chancellor of the exchequer (Image: Justin Tallis/PA)

"To some extent Rachel Reeves’ hands are tied by the promise in the manifesto not to raise income tax, national insurance or VAT," said Mr Solt.

"That has limited her options, but it does help us to predict the areas where she is likely to look to raise revenue. 

“One of the first places she will look is capital taxes. If she follows the advice of some commentators and brings capital gains tax rates to parity with income tax rates, there will be a significant impact on our sector, which has a high reliance on capital assets."

Mr Solt said Agricultural Property Relief could also be vulnerable - at least to reform if not outright abolition.

"Such a move should not affect trading farmers, as they would still be eligible for Business Property Relief, but for landowners who have tenanted land, this could be treated as an investment asset rather than an agricultural asset, and hence be liable to inheritance tax."

The government’s focus on house-building could also have a profound impact on land values, said Mr Solt.

"They have already announced that payments for compulsory purchase of land for development will be based on farming value, not potential development value," he said.

"This could counter the benefits of freeing up the planning system to allow more housing to be built on green and 'grey belt' land. If landowners incur increased rates of capital gains tax on such transactions with restricted proceeds, they could find themselves considerably out of pocket."

If significant changes are announced that come into effect on 6 April 2025, it will be difficult to process any new deals to beat that deadline, he said.

However, Mr Solt claimed one option for the chancellor could result in a win-win situation for everybody. 

“If the chancellor announced a delayed increase in capital taxes until, say, April 2026, you might see a huge increase in deals being done before that date, boosting tax revenue and perhaps even negating the need to raise tax levels in the long-term. Stranger things have happened."