UK Budget 2026: What you need to know

UK Chancellor John Healey delivered his maiden budget today, with a focus on the cost of living and broader inflationary pressures faced by businesses and households. While not an agriculture-focused Budget, several notable announcements have implications for farm profitability, labour costs and investment decisions. 

The main positives are support for fuel and energy costs. Areas to watch include rising labour costs due to increases in minimum wage.

Positive developments: 

• Continued fuel duty and red diesel support 

• Removal of import tariffs on fertilisers 

• Removal of import tariffs on kerosene heating oil 

• Business rates support for some diversified businesses. 

Areas to watch: 

• Higher labour costs 

• Changes to business taxation 

• The market and consumer impact of tariff reductions on select imported foodstuffs 

The Government has extended fuel duty support and continued support for rebated fuels, avoiding additional pressure on machinery and transport costs at a time when fuel prices remain at record highs.

This is being achieved by the Government cancelling plans to add 5p back onto fuel duty from January 2027 as well as extending the 3.7p cut to duty on red diesel for a further six months to 1 July 2027, keeping the rate at its lowest level for over 20 years.

Import tariffs on kerosene (currently 4%) are also being removed until December 2028. 

This is set to contain pressure on machinery-running costs and support energy-intensive operations while also managing costs for farms and rural properties using oil-fired heating systems. 

The Government has announced the suspension of tariffs on imported fertilisers until December 2027 as part of a wider package of measures aimed at reducing costs across the economy. For farm businesses, the measure is intended to help relieve pressure on input costs by reducing the cost of fertiliser imports and increasing competition within the domestic market.  

Although a reduction in import tariffs for fertilisers is welcomed, it is important to consider the wider context. So far during 2026, 100% of the UK’s ammonium nitrate fertiliser imports and 57% of granular urea imports come from EU countries, which means these products have not been exposed to import duties.  

The majority of other urea imports are sourced from Algeria and Egypt, which are not exposed to import tariffs.  

The impact of reduced tariffs will only be felt on those products imported from countries that already have tariffs applied, which in practice represent a small proportion of total imports. In addition, the scale of any benefit will depend on how much of the tariff saving is passed through the supply chain to farmers.  

Another consideration for fertiliser products is that from 1 January 2027, the Carbon Border Adjustment Mechanism (CBAM) comes into effect. There will be a tax applied based on the carbon emissions from the production of any imported fertiliser products.  

Based on current assessments, due to the policy being phased in, the impact of this is relatively low in 2027; however, it will increase over an eight-year period as the policy takes full effect at the target rates. 

Standing gas charges will be abolished from 2027 onwards, which will reduce fixed energy costs for some businesses.

This will benefit small users the most and may bring some savings to farm shops, offices or holiday lets, but the impact on primary agricultural production is likely to be limited, as many farms rely more heavily on electricity, heating oil, LPG or red diesel.

Small business rates relief (SBRR) thresholds increase to £18,000 for 100% relief (from £12,000) and £21,000 for tapered relief (from £15,000) for qualifying retail, hospitality and leisure properties in England from April 2027.  

For all other retail, hospitality and leisure (RHL) properties, rates will be frozen for two years so that no property in those sectors faces an above-inflation increase. Taken together, the decisions in this Budget mean that, from April, RHL businesses in England will see their business rates either frozen in real terms, reduced or cut to zero.  

Some diversified businesses such as farm shops, cafés and holiday lets may benefit if they qualify for relief. 

On 1 April 2027, the National Living Wage will increase by 3.9% to £13.21 per hour, the National Minimum Wage will increase by 3.9% to £11.27 per hour for 18 to 20-year-olds and by 3.9% to £8.31 per hour for 16 to 17-year-olds and eligible apprentices, and the accommodation offset will rise by 3.9% to £11.53 per day.  

Agriculture and food production workers will be impacted by changes in the National Living Wage, both on farm and throughout the wider supply chain. From farm labourers and livestock staff to packhouse operatives, processing workers, warehouse staff and logistics employees, these roles are essential to maintaining domestic food production and getting food from farm to fork. 

Changes to the National Living Wage will increase earnings for many of these workers, providing welcome support to household incomes. However, they will also increase labour costs for businesses operating on tight margins. The impact is likely to be felt across the entire supply chain, particularly in more labour-intensive sectors such as dairy, poultry, pork, food processing, packing and distribution. 

For many businesses, the challenge will be balancing the need to reward and retain workers while maintaining competitiveness and managing cost pressures in an already-challenging operating environment. 

The Government has announced the temporary reduction of tariffs on over 100 food and drink products as part of its efforts to reduce household food costs.

Rather than direct supermarket price controls, the policy aims to lower prices by reducing the cost of imported goods and ingredients. The Treasury estimates the measures could save households around £21 per year on food shopping.  

Products which are expected to see their tariffs cut include:  

• Garlic (8% + £100 per 100 kg)  

• Gherkins (12%)  

• Citrus jams, marmalades and pastes (20% + £19 per 100 kg)  

• Throat pastilles and cough drops (8%)  

• Boiled sweets, filled or unfilled (8%)  

• Toffees, caramels and similar sweets (8%)  

• Plant-based beverages (soya, nut, cereal or seed) (8%)  

• Chocolate-coated waffles/wafers (8%) 

This is the second Government-led cost-of-living tariff package this year, following an initial package introduced in June 2026 covering products including pasta, fruit juice and tuna. 

While the focus of tariff line reductions has been on imported products, rather than domestically produced products, the overall impact of changing consumer preferences is likely to vary between sectors and will depend on how retailers and consumers respond. 

For most levy payers, the biggest Budget benefits are likely to come from the extended fuel duty support and continued support for rebated fuels. 

The main watch points remain on the rising labour costs, while the impact of tariff reductions on imports and domestic production will need to be monitored closely.