Farm Succession after the Budget: Is it time to make changes?

The latest Budget may have been relatively quiet for agriculture, but farming families should not interpret “quiet” as “nothing to do”. Since 6 April 2026, a £2.5 million allowance has applied to the combined value of agricultural and business property qualifying for 100% Agricultural Property Relief or Business Property Relief. Qualifying value above that allowance generally receives relief at 50% (which equates to an effective tax rate of 20%). Any unused allowance can be transferred to a surviving spouse or civil partner, meaning that, alongside the usual nil-rate bands, a couple may potentially pass on up to £5.65 million free of Inheritance Tax, depending on their circumstances and the availability of the relevant reliefs. The 2026 Budget also confirmed that the lifetime limit for Business Asset Disposal Relief will reduce from £1 million to £500,000 for qualifying disposals made on or after 6 April 2027. The relief currently applies an 18% Capital Gains Tax rate to qualifying gains made on or after 6 April 2026, subject to the detailed eligibility conditions and any relief previously claimed. Anti-forestalling provisions are also intended to prevent artificial arrangements designed simply to secure the higher limit before it changes.

Against that backdrop, this is a sensible time for farming families to review succession rather than waiting for the next Budget. Succession on a farm is rarely just a tax exercise. Who owns the land, who occupies it, how the farming business is structured and what rights individual family members have may all be quite different. A plan to “give the farm to the children” can become considerably more complicated where there is a partnership, agricultural tenancy, mortgage, development potential or different children taking different roles in the business.

The legal documents also have a habit of being forgotten. An old partnership agreement may no longer reflect how the farm operates. Land may remain registered in the names of parents who have stepped back from the business. Wills written years ago may not achieve what the family now intends. Informal arrangements allowing another farmer to use land or buildings can also become important when ownership changes. That does not mean everything should be reorganised immediately. Rushing to transfer valuable assets purely for tax reasons can create difficulties of its own, including Capital Gains Tax, Stamp Duty Land Tax, loss of control and exposure to a recipient’s divorce, insolvency or death.

The better starting point is usually to establish the present legal and tax position, decide where the family ultimately wants to get to and then work backwards with the solicitor, accountant and land agent working together. For some families, that may involve lifetime gifts. For others, the better course may be to update Wills, partnership agreements, ownership arrangements or tenancies while retaining the existing structure. Anyone considering retirement or a sale should also seek advice promptly, particularly in light of the forthcoming reduction in the Business Asset Disposal Relief lifetime limit.

Tax rules will continue to change, but uncertainty is not a good reason to leave succession planning untouched. If anything, it makes having the underlying legal arrangements in order more important.

At Leathes Prior, our Agriculture and Rural Business Team regularly works with farming families and their other professional advisers to put practical succession arrangements in place. If you have been meaning to review how the farm or farming business will pass to the next generation, now would be a sensible time to start that conversation via email at info@leathesprior.co.uk or via telephone on 01603 610911.