Simon Dixon Smith of Savills comments, "Farmers and landowners have enjoyed a surprisingly benign capital tax regime under Labour. They must now play their part in getting the country back on its feet. Forward planning will allow future liabilities to be kept to a minimum. The short term change in CGT may drive up land prices further."

Capital Gains Tax was the major concern and the Chancellor clearly appreciated that a large increase would reduce activity and lead to a fall in revenue. An increase to 28% for higher rate taxpayers is perhaps a fair compromise but the lack of any taper or indexation will be a disappointment to long term holders of assets. This rate comes into force from midnight tonight, vindicating the tax planning activities that have taken place over the last month.

The 18% Capital Gains Tax rate was generally regarded as an acceptable price to pay. As the economy picks up and new capital gains are generated we could see a resurgence of interest in rollover relief into agricultural land, particularly from business sellers looking for a new asset class that is seen as a safe haven and Inheritance Tax efficient. Where average land prices are £6,000/acre buyers benefiting from Rollover Relief could afford to pay more than £2,000/acre extra. This will only exacerbate the current divergence of agricultural incomes and land values.

One of the reasons for the lack of supply of farmland in the market is the tax disincentive to sell on retirement. If a farm qualifies for Agricultural Property Relief and Business Property Relief then on death all previous capital gains are written off and the asset can pass down without Inheritance Tax. The Chancellor's decision to increase Entrepreneur's relief to £5m means that the vast majority of farmers would be able to retire and sell with Capital Gains Tax restricted to 10%. Tax planning thereafter can ensure that any future Inheritance Tax liability is kept to a minimum.

Ian Bailey head of Savills Rural Research add, "The rise in Capital Gains Tax to 28% will not affect the land market and we anticipate supply for the year will be tight - probably under 100,000 acres. This tight supply will support values and we are sticking to our growth forecast of 5-6% for the year."

Incorporation of the farm business has been back on the agenda with the rise in the top rate of income tax to 50%. This will become even more beneficial as the small business rate of corporation tax falls to 20% in April 2011. The standard rate for larger businesses is also set to fall over 4 years to 24%.

Those investing in their businesses have already been hit by the removal of Agricultural Buildings Allowances. They will now suffer further with a cut in the Annual Investment Allowance from £100,000 to £25,000 and falls in the rate at which assets can be written down, both from 2012.

Many farmers have diversified into Furnished Holiday Lettings and the threat of having this activity considered as investment income has been removed although new rules on eligibility and restrictions on loss relief are to be introduced by April 2011.

Labour's tax on landlines to pay the faster broadband has been scrapped but the commitment to high speed internet access remains with regulatory changes expected to encourage private sector investment.