The Budget was delivered on 28 October 2026 by Chancellor John Healey. While it was not specifically aimed at agriculture, several announcements could affect dairy farmers, particularly those relating to fuel, fertiliser, wages, energy and business investment.
One of the more positive announcements for farming businesses is the extension of fuel duty support.
The Government has:
- Extended the 3.7p per litre reduction in red diesel duty until 1 July 2027.
- Cancelled the planned return of the 5p per litre road fuel duty increase from January 2027.
- Removed import tariffs on kerosene heating oil until December 2028.
For dairy farmers, this could help limit some of the costs associated with tractors, loaders, machinery, farm transport and heating. However, with fuel prices still considerably higher than a year ago, the extension is unlikely to transform farm finances overnight.
The Budget also announced the suspension of import tariffs on fertilisers until December 2027. This could help reduce fertiliser costs by encouraging competition and making some imported products cheaper. For dairy farms, where fertiliser plays an important role in grassland management, silage production and maintaining yields, any reduction in input costs is welcome. However, the benefit may be relatively small. Much of the UK’s fertiliser is already imported from countries that are not subject to these tariffs. Furthermore, the introduction of the Carbon Border Adjustment Mechanism (CBAM) from January 2027 could add costs to certain imported fertilisers as the scheme is phased in.
Ultimately, whether farmers see any savings will depend on suppliers passing the reductions on.
A more challenging announcement for dairy farmers is the increase in the National Living Wage.
From 1 April 2027:
- National Living Wage will increase by 3.9% to £13.21 per hour.
- Minimum wage for 18–20-year-olds will increase to £11.27 per hour.
- Minimum wage for 16–17-year-olds and eligible apprentices will increase to £8.31 per hour.
For farms employing milkers, relief staff, general farm workers and other employees, this will mean higher wage bills. Dairy farming is a demanding, labour-intensive industry, often requiring staff to work early mornings, evenings, weekends and bank holidays. While higher wages are important for attracting and retaining good staff, they also add further pressure to already tight operating margins.
Energy is a significant expense for modern dairy farms. Milking parlours, vacuum pumps, milk cooling systems, compressors, lighting, water heating and ventilation all contribute to electricity consumption. The Budget includes the removal of gas standing charges from 2027, which could benefit some businesses. However, AHDB expects the direct benefit to primary agricultural production to be limited, as many farms rely more heavily on electricity, heating oil, LPG and red diesel. There is also a freeze on the main Climate Change Levy rate for electricity from April 2028. This may help prevent an additional increase through that particular charge, although it does not mean electricity bills themselves will be frozen.
For dairy farmers, energy efficiency and investment in reliable, efficient equipment will therefore remain important considerations.
Inheritance tax has been a major concern for farming families following the previously announced changes to Agricultural Property Relief (APR) and Business Property Relief (BPR). Many farmers were hoping the 2026 Budget would revisit these changes and provide greater reassurance for family-run businesses planning for succession. However, the Budget made no changes to the APR and BPR reforms.
In fact, tax increases are still coming. The major extension of IHT to personal pension funds comes in April. Income Tax on rents and savings has just been increased to give rates of 24 per cent, 44 per cent and 49 per cent in England, Wales and Northern Ireland from next April (Scotland is still to make its own decisions). The Mansion Tax applies from April 2028.
This means farming families still need to consider how the existing inheritance tax rules could affect the future transfer of agricultural land, property and business assets. Forward planning and seeking professional tax advice remain particularly important.
For dairy farmers considering investing in new parlours, milking technology, refrigeration, machinery or farm infrastructure, the tax treatment of business investment remains an important consideration. The NFU had called for greater investment incentives, including an increase to the Annual Investment Allowance and wider access to capital allowances. However, the Budget did not deliver the broader investment support the organisation had been seeking. This is particularly relevant to farms looking to modernise older facilities, improve efficiency, reduce running costs and make their businesses more sustainable.
Investment decisions will therefore need careful financial planning, with farmers checking the tax treatment of proposed purchases with their accountant before committing.
The Government has also announced temporary reductions in import tariffs on more than 100 food and drink products, including plant-based beverages. Although this is intended to reduce costs for consumers, it raises questions about the potential impact on UK food producers. Dairy farmers will be watching how changes to the cost of imported alternatives affect the wider milk and dairy market. The longer-term effect will depend on how retailers and consumers respond, so it is too early to say whether this will have a significant impact on demand for British dairy products.
Overall, the 2026 Budget offers some smaller areas of relief for farming businesses, particularly through fuel duty support and the removal of certain fertiliser import tariffs. However, it does little to address some of the bigger challenges facing the dairy industry.
Higher labour costs, ongoing pressure from energy and input prices, uncertainty around inheritance tax and a lack of additional investment incentives mean many dairy businesses will continue to face difficult financial decisions. The NFU has described the Budget as a missed opportunity for British food production, arguing that more could have been done to support farmers, improve cash flow and encourage investment in domestic food production.
For dairy farmers, the message is clear: keeping production efficient, managing overheads and investing wisely in equipment and technology will remain essential.
In a time where we cannot rely on the government for support, modern, reliable milking equipment, efficient milk cooling systems and well-maintained electrical installations must all play a part in helping farms manage running costs and make the most of their resources. While the Budget may not have delivered everything the agricultural industry was hoping for, the need for efficient, productive and sustainable dairy farms has never been more important.