From one generation to the next: succession planning and inheritance tax

Agricultural inheritance tax explained

Acknowledging succession in farming is “not new for the farming sector”, Brian gave a clear explanation of what is – next year’s change to inheritance tax legislation and the implications for farm succession.

He described inheritance tax as: “a tax that is assessable from the life estate of any deceased individual based on their worldwide assets.”

Since 2009, everyone has had a nil rate band of £325,000, so “if an individual dies for less than £325,000, they have not got an inheritance tax liability.”

This nil rate band is transferable between spouses, giving a total of £650,000 for a couple.

In addition, every individual has a ‘residential nil rate band’ of £175,000 if residential property is left to a ‘lineal descendant’. This gives a total allowance of £500,000 for an individual, £1 million for a couple.

Historically, this has meant only 1 or 2% of personal estates in the UK have been liable for inheritance tax.

On top of this, farming has enjoyed agricultural property relief (APR), covering land, a farmhouse and other farm buildings, at a rate, for the most part, of 100%.

“So, if your farm is worth 2 million pounds and it all qualified for agricultural property relief, no inheritance tax to pay,” said Brian. This is true whatever the value - £2 million or £10 million, there is no inheritance tax to pay.

But from April 2026, this is set to change. APR will no longer be limitless: “For every individual, the first £1 million will qualify for 100% relief, and anything thereafter will qualify for 50% agricultural property relief,” explained Brian.

So, the first £1 million is still tax-free, but thereafter it’s a 20% inheritance tax rate.

“Roughly speaking, if you've got a farming business where the combined estate of a couple is worth more than three million pounds, then that business is likely to fall into inheritance tax where it wouldn't be before,” said Brian.

“That is probably a 200-acre farm with a relatively modest house, relatively modest series of buildings and some plants and machinery and equipment.”

Find out more on agricultural property relief here.

 

Using agricultural inheritance tax as a catalyst for farm succession planning

Farm succession planning is a topic many choose to avoid – it’s emotional, it’s emotive and it can be put off until tomorrow. But can it?

Brian and Andrew believe the proposed change to agricultural inheritance tax means there’s never been a more important time for considering the future of your business. For many, it’s proving a good catalyst for starting conversations which are rarely regretted.

“I've not had many conversations with people who have addressed this and then gone back and said, I wish we hadn't had that conversation,” said Brian.

“There is a strong correlation between those businesses who have addressed succession properly and those businesses that are most profitable in the rural sector.”

“People are thinking, crikey, it's going to be terminal for the farm if we don't sort it. So, the flip side of [inheritance tax] is as a motivator for discussions to be had and hopefully the right plans to be made,” added Andrew.

The inheritance tax change is a concern for growing businesses, though. As Andrew tries to grow his business to support multiple families, the younger generation are seeing the tax change as a disincentive to growth: “They're feeling a bit miffed now because they're saying, well, what's the point in trying? We'll have a bigger business and then we'll get taxed.”

 

Why farm succession planning matters

But Brian thinks this could be just the reason for starting to talk about farm succession: “There aren't many scenarios whereby, with a bit of luck and a bit of time, the position cannot be improved by planning and planning early.”

Andrew sees timing as vital too, and has found learning from other farmers, using them as an example, helps. He also sees great value in drawing up a partnership agreement: “That's definitely a key part of the process of succession in my head.”

To begin the process, you might need a facilitator Brian advised. Someone external to “add a bit of oil to the wheels”, but “once you get things started, you can have some good, frank, open and honest conversations and take things forward.

He said: “Get advice, craft a plan, clearly communicate it, and then this is the most important bit, execute it in a timely manner. Otherwise, there's a risk that things drift, and then you've got an unexpected event, and the plan was there, but it didn't actually happen.”

Using his own experience of farm succession, Andrew concluded: “Make sure you're listening to what the next generation are actually wanting. It's their future, not yours. So, if you can then create the plan that is going to achieve what they want, then you've got much more chance of success.”

 

Top tips for starting the conversation

1.      Consider using an independent facilitator, which could be a family friend or accountant

2.      Meet away from the farm in a neutral location

3.      Have a structured agenda, allowing everyone to have their say and opinions respected

4.      Don’t be too detailed at the beginning, just think about the overall ‘direction of travel’

5.      Be open minded to different ways of working through a succession conversation and different ‘exits’

 

Peter’s showstoppers 

1.      Understand what all parties want, making sure opinions are respected and assumptions avoided

2.      Craft a plan and use the professionals to help take the emotion out of the process, before share and review it

3.      Know what you need to be doing and act in good time to achieve your goal

Listen to the full episode at here- also available via Spotify and Apple podcasts.

 

About our guests: 

Brian Harvey is head of agriculture at PKF Francis Clark Chartered Accountants. From a Cornish farming family, he specialises in a range of tax and accounting issues, including inheritance tax and succession planning for rural businesses. He is also involved with the Cornwall branch of the Royal Agricultural Benevolent Fund (RABI).

Andrew Branton runs a dairy farm near Tiverton with his wife and two of his children. Focused on growing smarter not bigger, the family was named Best Family Farm in the 2025 Devon Farm Business Awards.