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,” explained Brian.

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 all set to change. Agricultural property relief 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,” added 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.

 

Why farm succession planning matters

This proposed change to agricultural inheritance tax has heightened the focus on farm succession planning, so why is it still avoided by so many farmers?

Because farm succession planning is emotive according to Brian. “People do want to protect their families, but they don't necessarily want to think about their own mortality.”

Indecision about what the future holds for an individual, fear of losing control and not trusting the next generation are all factors able to fuel a reluctance. But starting the conversation about passing on the family farm is rarely regretted.

Brian continued: “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.

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

As a farmer, Andrew was able to draw on his own experience of farm succession and shared the proactive planning he put in place for his family farm.

Andrew has three children, one of whom did not want to be involved in the family business, increasing, in his view, the need to plan: “If you've got somebody that you think isn't going to contribute, then I think the planning becomes more important because you still have to have a plan.”

Coming from a family of seven siblings, farm succession planning was a constant for Andrew:

“I guess it's always on your mind, really, as I said from my personal background, but when your kids are young, you can't really make decisions about where they're going to want to go in life.

“It's sort of evolved as they've got a bit older and then shown the genuine interest and wanting to come home and wanting to be involved.”

The inheritance tax change is a concern, though, as they try to grow the business to support multiple families, the younger generation seeing it 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.”

Using agricultural inheritance tax as a catalyst

But could this be just the reason for starting to talk about farm succession? Brian thinks it could:

“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.

“I think the main thing to happen is that open communication needs to start from the beginning. People need to be listened to, opinions respected, and assumptions are always very dangerous.

“As soon as you can start having those conversations, then you can start thinking about what will be needed.”

Andrew found learning from other farmers and using them as an example helped. 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.”

Box: The last word on succession planning:

“Get advice, craft a plan, clearly communicate it, and then this is the most important bit, then 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.”                                                                                                                   Brian Harvey

 

“Make sure you're actually 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.”                                                                                                                                                             Andrew Branton

 

Box: 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 https://www.cornishmutual.co.uk/news-advice/farming-focus-podcast/ - also available via Spotify and Apple podcasts.

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.