Legal News | 23.02.26

Harvesting Inheritance: Succession Planning Tips for Farmers

Farming rarely stops at a particular age.  It is a way of life, often involving several generations working together.  Deciding how and when responsibility and assets pass to the next generation is seldom straightforward.

Concurrently, British agriculture has changed dramatically over the last two decades.  Land values have risen sharply, businesses have become more complex, and significant inheritance tax reforms are approaching.

This article explores practical succession planning tips to help farming families navigate these changes, but it is not intended as a substitute for professional advice tailored to individual circumstances.

Tip 1: Understand why succession planning matters

Almost half of farmers have no clear plan for handing over their business.  NFU Mutual found that, as of June 2025, 49.1% of farmers surveyed had no succession plan, and 31.5% of those did not believe planning was relevant or necessary.

These attitudes contrast with the demographic reality.  In 2025, 40% of farmers in England were aged 65 or over, while just 5% were under 35.  Many continue working well beyond state pension age, and difficult conversations about stepping back are often postponed.

This presents the risk that, as land values continue to outstrip inheritance tax thresholds, a lack of planning leaves families exposed to tax bills that can only be met by selling land or key assets.  This often becomes financially and emotionally devastating.

The first step in addressing this issue is recognising that it needs to be addressed in advance.

Tip 2: Understand the changing inheritance tax landscape

Succession planning has historically relied on 100% Agricultural Property Relief (“APR”) and Business Property Relief (“BPR”), combined with the capital gains tax uplift on death.  Traditionally, this allowed many family farms to pass on qualifying assets entirely free of inheritance tax.

Forthcoming changes mean that from 6 April 2026, the 100% relief for APR and BPR will be capped at £2.5 million per individual across all qualifying assets.  Above that amount, relief will reduce to 50%, meaning that the value above £2.5 million will effectively attract inheritance tax at 20%.  Any unused portion of the £2.5 million allowance can be transferred to a surviving spouse or civil partner, meaning a couple could potentially shelter up to £5 million of qualifying assets from inheritance tax, on top of the nil‑rate band and residence nil‑rate band, if available.

HMRC has become more rigorous in examining whether individuals are genuinely involved in the farming business, particularly where diversification or non-farming activities are included.

As a result, plans that were previously effective may no longer achieve the desired tax outcome. Relying solely on reliefs at death is increasingly risky, and farming families may need to consider alternative strategies, such as lifetime gifting or more structured succession arrangements, to protect the business and family wealth.

Equally, from April 2027, unspent pension funds will fall within the inheritance tax net, further increasing potential exposure for farming families who hold significant pension value.

Tip 3: Review existing documentation

Succession planning is not just about tax.  The legal structure of the farming business, and the documentation that underpins it, is equally important.  Out of date or inconsistent documents are a common cause of disputes and can undermine otherwise sensible planning.

Wills

Wills should be reviewed regularly and updated as the farming business evolves.  Changes in land ownership, diversification activities or family circumstances can all render an existing Will inappropriate or ineffective.

Particular care is needed to ensure that testamentary provisions align with how the business actually operates.  Inconsistencies between a Will, the underlying ownership of land and assets, and any partnership or company arrangements are a frequent source of conflict and uncertainty.  In a farming context, this can result in unintended fragmentation of the business, delays in administration, or the loss of valuable inheritance tax reliefs.

Regular reviews ensure wills remain aligned with both family objectives and the wider succession plan, reducing the risk of disputes and providing clarity for the next generation.

Partnership agreements

Partnerships are commonly used within farming families to facilitate a gradual transition of responsibility and ownership.  However, without a properly drafted and up-to-date partnership agreement, the death or retirement of a partner can have unintended and disruptive consequences.

In the absence of clear provisions, statutory rules may apply, potentially leading to the dissolution of the partnership, unexpected entitlements for the deceased’s estate, or difficulties in continuing the business.

A well-drafted agreement can address succession explicitly, setting out what happens on death, retirement or incapacity, and providing mechanisms for valuation and ongoing management.  Early involvement of professional advisers ensures that wills, partnership agreements, and tax planning can be considered together and support the long-term future of the business.

Tip 4: Consider lifetime gifting

One of the most effective ways to secure a smooth succession is to involve the next generation while you are still running the business.  This could mean transferring ownership of part of the farm and other assets or giving them a formal role in management.  Lifetime gifting can help reduce future inheritance tax exposure and give the next generation a quantifiable stake in the business.

Although this requires diligent planning, if you continue to live on the land, run the business, or benefit financially from what you’ve gifted, this can undermine the intended inheritance tax treatment.

With farmers living longer, lifetime gifting also allows older generations to step back gradually and enjoy retirement, while younger family members gain meaningful responsibility and security.

Tip 5: Redirect inherited estates where appropriate

Succession planning is not limited to assets that an individual expects to pass on in the future.  Where someone has already inherited an interest in an estate, it may be worth considering whether that interest should be retained, or whether all or part of it should be redirected to another person or into trust.

A deed of variation allows a beneficiary, within two years of an inheritance, to redirect assets they have inherited as though the revised arrangement had been put in place by the deceased. This can be particularly helpful where the inherited interest does not sit comfortably with the wider succession plan, or where passing value on to the next generation at an earlier stage would better reflect how the business or family assets are intended to be held.

Used carefully, a deed of variation can provide a tax-efficient way for a beneficiary to realign inherited assets with longer-term family and succession objectives, without triggering immediate inheritance tax or capital gains tax charges.  Specialist advice is essential to ensure the variation is appropriate and effective.

Conclusion

Succession planning is rarely quick or straightforward.  It should not be treated as a one-off exercise. Plans must evolve alongside the family, the business, and legislation.  When handled correctly, succession planning can safeguard the farm and provide clarity and reassurance for future generations.

For guidance tailored to your circumstances, contact a member of the Agriculture and Landed Estates team.  They can help ensure your succession plan is effective and aligned with your family’s needs.