New HTA data demonstrates the Autumn Budget hit to horticulture

13 December 2024

New data from the Horticultural Trades Association (HTA) further sets out the risks posed to the environmental horticulture sector by the Autumn Budget. As a sector of mostly small and medium-sized (SME) businesses, many of which are family-owned, the challenge is acute due to the triple whammy of measures announced in the Budget concerning changes to inheritance tax (IHT), national insurance contributions (NIC), and the National Living Wage (NLW).

Two recent HTA member surveys, the Q3 2024 Business Barometer and the November 2024 Member Consultation Survey, provide a snapshot of the industry's current state:

• A 21% reduction in net profit is forecast for 2025 due to rising NIC and NLW costs, equating to a £134 million collective hit on HTA members.
• Two-thirds of businesses plan to raise prices, while many will postpone or reduce capital investments and consider recruitment freezes.
• Sales and net profits were already 7% behind forecast before the Budget, with retailers and landscapers facing additional pressures from adverse weather and rising costs.

To put these numbers in context, retailers have given some examples of the real impact on HTA member businesses:

“When I first calculated the impact of the NI and minimum wage changes in the budget, I thought I had the decimal point in the wrong place. The scale of impact on profit is colossal. The impact of the National Insurance rises and the lowering of the threshold along with the minimum wage increase will have a huge impact on our business, especially with the number of part-time team members now impacted by the threshold change. It’s the equivalent effect of us being forced to close for snow for the whole of December, our busiest and most profitable month, with all the costs still incurred but none of the sales.”

“To get back to even ordinary levels of profit would mean cutting staff numbers, or cutting costs by 20%, or increasing margin by 6%, all of which are seismic levels of change.”

From April 2026, inheritance tax (IHT) relief for business and agricultural assets will be capped at £1 million for an individual. For any amount exceeding this threshold, a reduced IHT rate of 20% will apply instead of the standard 40% rate. It is hoped that the tax can be paid in interest-free instalments over 10 years to alleviate the immediate financial strain. However, family-owned garden centres and commercial growers are uniquely vulnerable to these changes, as much of their asset value lies in land and property. This situation places them at a disproportionately severe disadvantage compared to other sectors. HTA members have voiced concerns about the challenges of transferring businesses to the next generation, with some contemplating the sale of assets or even the entire business—actions that could jeopardise jobs and livelihoods.

"Having to sell part of the land to pay the tax and make the business unprofitable is short-sighted, to say the least."

“It is getting too much. If you make a profit and are then taxed too much on it, why bother with the stress of running the business? You might as well sell up.”

“The change to Business Property Relief is hugely worrying for the family and the business. The family have always ploughed profit back in to grow the business and have not taken big salaries or dividends. The family simply do not have the personal funds to meet IHT on the shares. So, will shares have to be sold? Could the business buy back shares, and how might the business afford to do this?  Banks may not wish to lend for that purpose. Will other sources of finance be required, or will business assets have to be sold? Private equity is a very unattractive option as it is short-term and exit-driven. We look to the long-term success of the business for the benefit of our teams and the local community. This new landscape directly impacts the decision-making of the business and whether and how it invests in growing for the future. The priority now must be to protect the business in the face of this big IHT (and NI) challenge.”

To assist members in navigating these challenges, the HTA hosted an Autumn Budget Webinar on December 2, 2024. Industry experts from Johnston Carmichael and Turner Morum provided guidance on adapting to the fiscal changes as well as signposting available reliefs.

The HTA continues to advocate on behalf of its members, engaging with policymakers to highlight sector challenges. Recent actions include a joint letter with the British Retail Consortium and ongoing discussions with government officials.

HTA members can access more information and resources via HTA Policy Member Briefings or contact [email protected].