Farm succession under the 2026 tax rules starts with numbers outsiders trust

Oct 27

4 min read

Updated: Oct 28

In many family farming groups, the knowledge of what each company owns, what it earns and what it charges the others lives in two or three people's heads. That was always a little untidy. Since 6 April 2026 it has had a price.

From that date, agricultural and business property relief from inheritance tax has had a ceiling. Qualifying assets above £2.5 million per person are relieved at 50%, not 100%. That means an effective tax rate of up to 20% on the excess. Not knowing exactly what qualifies is no longer just untidiness. It can be a tax bill paid in instalments over ten years.

A group may be passing to the next generation, bringing in a partner, or in some cases selling the farm to an outside buyer. The work is the same in each case. Someone who was not there when the decisions were made has to be able to trust the numbers.

A ceiling on the relief makes the asset list matter

The position at October 2026, in outline, is this. The October 2024 Budget announced a £1 million cap on 100% relief. On 23 December 2025 the government raised it to £2.5 million. The reforms were legislated in the Finance Act 2026, which received Royal Assent on 18 March 2026. According to ACCA's summary of the rules, any unused allowance can pass to a surviving spouse or civil partner. So a couple can pass on up to £5 million of qualifying assets at the full rate, on top of the usual nil-rate bands. Tax on qualifying assets above the allowance can be paid in ten equal annual instalments, interest-free.

This is a description of the rules, not advice. The detail matters, and the rules have changed twice in two years. Anyone affected should check the latest HMRC guidance and take advice from a qualified tax adviser or solicitor. The practical point, though, is plain enough. Advisers cannot plan around assets nobody has listed, valued and placed in the right company. Every hour they spend piecing that together is billed.

The farming may not be what pays

Enterprise-level numbers matter more than they used to. Defra's Farm Business Income figures for England in 2024/25 show agri-environment payments averaged £21,100 per farm, about 30% of total farm business income. On cereal farms, the agricultural activity itself made an average loss of £27,400. Diversification and environmental schemes did the earning. Some 21% of all farms failed to make a profit. Over the three years to 2024/25, Defra found the top quarter of farms performed almost twice as well as the bottom quarter.

Picture a group with a farming company, a contracting business, a let property portfolio and an energy project. A single consolidated profit figure tells a successor very little. They need to see which part earns, which part loses, and which part is quietly subsidising another.

Where group accounts go wrong: charges between companies

The most common problem I see is that the numbers cannot be relied on company by company. Machinery is owned by one company and used by another, for a charge set years ago. Rent between family entities has not been reviewed since the lease was signed. Shared overheads, such as the office, the workshop and the farm manager, sit wherever they always have.

Most family farming groups fall within the small and medium-sized enterprise exemption from UK transfer pricing rules. The Autumn Budget 2025 confirmed that medium-sized businesses will keep that exemption. So the tax rules may not force the issue. A successor, a lender or an outside partner will still ask whether the charges between companies reflect what the work and the assets are worth. Your accountant can confirm where your group stands.

The ages say start now

Defra's 2025 farming evidence pack found that two-fifths of farm holders in England were over 65. Just 5% were under 35. The arithmetic does not need labouring. Most of this tidying can be done in a year. But two or three years of clean, consistent numbers is what gives an outsider confidence. It also gives the family a clear picture for making its own decisions.

The time to get the numbers ready is before anybody needs them.

Five questions to show a group is ready

A group is ready for a handover, a new partner or a valuation when it can answer yes to each of these:

Asset register: every parcel of land, building and major machine is listed, valued and shown against the company or person that owns it.
Enterprise accounts: each enterprise has its own profit and loss, with shared costs allocated on a stated basis.
Intercompany charges: rents, machinery hire and management charges are written down and reviewed against current market rates.
Written agreements: tenancies, contract farming, grazing and supply arrangements that rest on a handshake are put on paper.
Key people: the jobs that only one person knows how to do are written down, and someone else has done them at least once.

What to do first

Build a single asset register for the whole group, showing which company owns what.
Ask your accountant to produce last year's results enterprise by enterprise, not just company by company.
List every charge between group companies, with the date it was last set, and review the oldest ones first.
Book a meeting with a qualified tax adviser to check how the April 2026 relief rules apply to your assets, armed with the register.
Choose one handshake agreement this quarter and put it in writing.

Sources

Figures are taken from the sources listed and were correct at the time of writing. Where rules are described, check the latest official guidance and take qualified advice before acting.