Passing on the farm
Keep the farm in the family
How inheritance tax works for farms in England from April 2026, a quick estimate for yours, and the legal ways to pass it on to the next generation with as little tax as possible.
Get advice before you act. This page is general guidance, not legal or tax advice. Succession plans can go wrong in expensive ways (a gift that loses its relief, a will that wastes an allowance, a falling-out). Every family is different, so see a solicitor and an accountant who work with farms before you change your will, give land away or set up a trust.
The rules now, in one minute
- Nil-rate band £325,000 each, plus the residence nil-rate band £175,000 if your home goes to children or grandchildren. Both are frozen until April 2031. The residence band shrinks by £1 for every £2 your estate is worth over £2 million, so most farms of any size lose it.
- Agricultural Property Relief (APR) covers the agricultural value of farmland, farm buildings, and a farmhouse of a size and character that suits the farm. You must have farmed it yourself for 2 years, or owned it for 7 years if someone else farms it.
- Business Property Relief (BPR) covers a trading business (the farming business itself, machinery, livestock, a contracting business) and the extra value of land above its agricultural value, such as hope or development value. It doesn't cover businesses that mainly hold investments, like lettings or most holiday cottages.
- APR and BPR together get 100% relief on the first £2.5 million, then 50% on the rest. An unused allowance passes to a surviving husband, wife or civil partner. It doesn't pass between unmarried partners.
- AIM shares and other unlisted shares on a stock exchange now get 50% relief only, and don't use up the £2.5 million.
- Pensions: from 6 April 2027 most unused pension pots count as part of your estate. APR and BPR don't apply to them.
- Land in an environmental land management agreement (SFI, Countryside Stewardship and similar) still counts as agricultural for APR.
Official pages: Agricultural relief · Business relief · The April 2026 changes · Inheritance tax
Rough estimate for your farm
A rough guide only, for the last of a couple to die (or a single person), with everything going to children. It ignores gifts in the last 7 years, trusts, the value of the home itself, and charity gifts. Your adviser will work out the real figure.
Ways to secure the farm for the next generation
These are the main legal ways farming families cut or spread the bill. Most plans use several together. They're roughly in the order most advisers start.
Everyone Make a will, and keep it up to date
Without a will, the law decides who gets the farm, and it may not go to the child who farms it. A good will:
- Says who gets the land, the farming business and the farmhouse, and who gets something else instead, so non-farming children are treated fairly without splitting the farm up.
- Makes sure both spouses' allowances get used. Anything left to a husband, wife or civil partner is free of tax, and their unused £2.5 million, £325,000 and £175,000 pass on. Some couples leave the farm straight to the children on the first death instead, to use that allowance while the rules are known. Ask which suits you.
- Doesn't waste relief. Gifts to a spouse or charity are tax-free anyway, so leaving them the farmland (which has relief) while savings go to the children (which don't) can mean paying tax you didn't need to.
Review it after any change: a marriage, a death, buying or selling land, or new rules (like April 2026). Making a will on GOV.UK
Everyone Keep it a farming business, and keep the paperwork
- Relief depends on facts at death, so keep the land farmed and the business trading. Land that's simply let out, or a business that's mostly lettings, can lose BPR.
- Have a written partnership agreement if the farm is run as a partnership. It should say who owns the land (in the partnership or outside it), and what happens to a partner's share when they die.
- A farmhouse only gets APR if it's the centre of an active farm and its size suits the farm. Keep records of who farms and lives there. If the farmer moves into a care home, take advice early.
- Keep the business's debts secured on assets that don't qualify for relief where you can. A loan secured on farmland reduces the relief.
- Be careful with diversification. Holiday lets, storage and livery yards are usually investments, not farming, so may not qualify. Keep them as a small part of a mainly farming business, and take advice before big changes.
Bigger farms Give some away in your lifetime
A gift to your children is free of inheritance tax if you live 7 more years. If you die sooner, it's added back, with less tax due once 3 years have passed (taper relief: 32%, 24%, 16%, then 8% instead of 40%).
- Gifting land over several years lets you pass on more than £2.5 million at full relief: the allowance looks back over the last 7 years, so gifts made more than 7 years before death free it up again.
- The person you give farmland to must keep it farmed until you die (or they do), or the relief on the gift is lost.
- Don't keep a benefit. If you give away the farmhouse but still live there rent-free, or keep the income, the gift doesn't count (a "gift with reservation"). Pay a full market rent, or give a share and farm together.
- Capital gains tax: a gift counts as a sale at market value. Holdover relief usually puts off the tax on gifts of business and farmland, but the children then take over your original cost. Assets kept until death get a free uplift to their value at death instead, so for some families keeping land is better than gifting it.
- Small gifts help too: £3,000 a year each (plus last year's if unused), £250 to anyone, wedding gifts, and regular gifts out of spare income, which are free straight away.
- Gifts made from 30 October 2024 to 5 April 2026 are judged under the new £2.5 million rules if the giver dies from 6 April 2026 within 7 years.
Bigger farms Bring the next generation in now
- Make the son or daughter who will farm a partner in the business, or a shareholder in the company, so profits and business assets build up in their name.
- Give or sell them a share of the land or the business bit by bit, using holdover relief and your yearly allowances.
- A farming company can be useful for very large farms, but moving land into a company can mean stamp duty and capital gains tax, and changes how relief works. It's not a quick fix.
- Agree a plan as a family, write it down, and tell everyone. Most farm disputes come from promises that were never written down (courts can enforce them).
Bigger farms Trusts
- A trust can hold land for the family, keep the farm in one piece, and let you choose later which child gets what.
- Each person can put up to £2.5 million of relief-qualifying property into trusts in total. Trusts set up before 30 October 2024 each keep their own £2.5 million.
- Trusts pay their own inheritance tax: up to 6% every 10 years, and when property leaves the trust. With relief, that's often small, but the paperwork and fees are ongoing.
- Putting assets into a trust can be a gift with reservation if you still benefit. Setting one up is a job for a specialist solicitor.
Bigger farms Life insurance to pay the bill
- A life policy written in trust pays out to the children outside your estate, so they can pay the tax without selling land.
- For couples, a "joint life, second death" policy pays when the second of you dies, which is usually when the tax is due. It's often cheaper than you'd think.
- The premiums can usually be gifts out of income, so they're free of tax straight away.
Everyone Paying the bill: 10 years, no interest
- Inheritance tax on farmland and business property can be paid in 10 equal yearly payments with no interest, so the farm's profits can pay it.
- Plan where that money comes from: a cash reserve, rent from a let cottage, insurance, or selling a small bit of land or development plot.
- If the farm is sold, the rest of the tax becomes due at once.
Everyone Pensions, powers of attorney and the rest
- Pensions count towards inheritance tax from 6 April 2027. Spending pension money first and keeping farm assets (which get relief) may now make more sense. Ask your adviser.
- Make a lasting power of attorney for money and for health, so someone you trust can run the farm and sign forms if you can't. Without one, your family may need to go to court. Power of attorney
- Keep the farm's numbers in one place (SBI, CRN, CPH, herd marks, deeds, tenancies and scheme agreements) so the next generation can take over smoothly. The My details page and a printed copy with your will help.
- If you sell land, Business Asset Disposal Relief cuts capital gains tax on a business sale to 18% (from April 2026), up to £1 million of gains in your lifetime. BADR on GOV.UK
"Getting around" inheritance tax: what's legal and what isn't
Using the reliefs, allowances and gifts above is planning that the law intends, and HMRC accepts it. Be wary of anything else:
- Avoid marketed schemes that promise to make a farm or estate tax-free through loans, offshore trusts or complicated arrangements. HMRC challenges them, and you can end up paying the tax, interest and penalties. HMRC on tax avoidance
- Deathbed changes rarely work. Gifts within 7 years are added back, and assets must be owned and farmed for 2 years before they get relief.
- Don't fake it. Calling land "farmed" when it isn't, or a gift that you still benefit from, can lose the relief and lead to penalties.
Who can help
- A solicitor who does farm wills and succession, ideally a member of STEP (the Society of Trust and Estate Practitioners) or the Agricultural Law Association.
- An accountant who works with farms, for the tax side and the partnership accounts.
- A land agent or valuer (a member of the CAAV or RICS) for the value of the land and the farmhouse, which is often what HMRC argues about.
- The Farming Community Network (fcn.org.uk, helpline 03000 111 999) and RABI (rabi.org.uk) help families through difficult talks, stress and money worries. Both are free.
- Free one-to-one business advice, including succession, is sometimes offered through Defra-funded schemes. Check the Find funding page for what's open near you.
Start the conversation now. The best farm succession plans are agreed years ahead, with the whole family, while everyone is well. Even a first meeting with an adviser will tell you roughly where you stand.