Farm succession planning and inheritance tax strategies

Family farm succession planning has always been high on the agenda for  Old Mill’s Rural team, but recent changes to inheritance tax have made those conversations more pressing. From 6 April 2026, APR and BPR reforms mean the first £2.5 million of combined qualifying assets per person now receives full 100% relief, with 50% relief above that threshold, an effective 20% rate on the excess rather than the standard 40%.

Good farm inheritance tax planning starts well before a return is due. For married couples and civil partners, any unused £2.5 million APR and BPR allowance can transfer to the surviving spouse or civil partner, potentially providing up to £5 million of qualifying agricultural and business assets with 100% relief on the second death.

Existing nil-rate bands may provide further relief: for example, where both £325,000 nil-rate bands are available, up to £5.65 million could potentially pass free of inheritance tax. Assets above the available APR and BPR allowance may still qualify for 50% relief. The precise position will depend on the assets involved and individual circumstances.

Where inheritance tax is due on property qualifying for APR or BPR, it can be paid in 10 equal annual, interest-free instalments, which can help families manage the liability without having to find the full amount immediately.

Farm succession planning need not be reactive: NFU Mutual research shows the proportion of farming families with a plan in place has risen to 38%, up from 27% in 2020. That is an encouraging process, but it also means that many farming families have yet to put a formal succession plan in place.

Taxation is not the only pressure shaping decisions right now. Farm income and support are being restructured too, with the Basic Payment Scheme phasing out and the Sustainable Farming Incentive reopening through 2026 in stages. Agricultural business planning increasingly means weighing tax, structure and income support together, not treating each as a separate conversation.

There can be a lot to consider, and trying to address tax, succession, business structure, retirement, income and family priorities at the same time can quickly become overwhelming. The important thing is to start the conversation. Breaking the process into manageable steps can help families understand their options, agree on their priorities and see the benefits that good planning can bring.

One of the most common reasons agricultural succession planning stalls, or causes friction, is treating ownership and leadership as the same handover. They are not, and they rarely need to move at the same pace. Leadership, the day-to-day decisions and direction of the business, can pass to the next generation gradually, while ownership follows its own timeline, shaped by inheritance tax planning, retirement needs and fairness across the wider family. Separating the two gives everyone room: the older generation can step back from daily management without giving up security, and the next generation can grow into genuine responsibility before the ownership question is even settled.

Getting this right depends on structure, not just intention. Family farm governance, whether a simple family constitution or a more formal charter, can set out how decisions are made, how disagreements are resolved, and what happens if someone wants to step away from the business.

Partnership agreements, many drawn up decades ago, often need revisiting to reflect how the business actually runs today. Depending on your circumstances, limited companies, family investment companies, trusts, landed estate services, or contract and share farming arrangements can all help separate ownership from operational control in a way that suits your family, not a template.

Governance is not corporate bureaucracy bolted onto a family farm. At its heart, it is simply clarity, agreed while relationships are good, so it holds when things change.

Family farm business planning is not a single event to complete once and forget. Diversification into new income streams, from tourism to renewables to environmental schemes, can change how assets are classed for tax purposes. Family circumstances shift too: a divorce, a new marriage, or a family member stepping back or stepping in can all unpick assumptions built into an old will or agreement. The families who weather this best treat succession and exit planning, one strand of wider farming business succession, as ongoing rather than one-off. Our succession case study shows what it looks like when a family builds that flexibility in early.

Succession planning for farmers works best as an ongoing partnership, not a one-off project. Around the farm kitchen table, we have seen what makes a plan last: honesty between generations, structures that reflect how the family actually works, and advice that treats rural business succession and family life as one conversation, not two.

Head of Rural Willem Puddy and the wider rural team have worked alongside farming and estate-owning families for decades, helping them protect what they have built, while creating strong, sustainable businesses for the generations that follow.

You do not need to have all the answers before starting the conversation. If your family is thinking about succession, ownership, or how to structure the business for the next generation, our Rural team can help you work through the issues step by step, identify your priorities and build and plan what works for your family and your business.

Get in touch with our Rural team to start the conversation.