Rural Intelligence FOR FARMS & ESTATES
AUTUMN 2026
INTRODUCTION Welcome to our Autumn 2026 edition of Rural Intelligence. As we move into the autumn, many farming and rural businesses are reflecting on one of the most challenging growing seasons in recent memory. The prolonged summer drought has affected crop yields, livestock systems, water availability and cash flow across much of the country, reminding us once again of the increasing volatility facing UK agriculture. While resilience has always been a hallmark of the sector, the events of this year have highlighted the importance of long-term planning, investment and adaptability in an increasingly uncertain environment. Alongside the immediate challenges on farm, the wider debate around the future of British food production continues to gather momentum. Food security and food resilience have risen up the political agenda, with growing recognition that a thriving domestic agricultural sector is critical not only to the rural economy but also to the nation’s long-term strategic interests. The discussion is moving beyond production alone, encompassing supply chains, environmental delivery, energy security and the role rural businesses play in supporting local communities and economic growth. Politics remains firmly in focus. Andy Burnham’s recent comments on the importance of connecting economic growth with regional food production and rural enterprise have added to a wider national conversation about the role of agriculture in delivering sustainable prosperity. At the same time, businesses across the sector are looking ahead to the Autumn Budget, seeking clarity on taxation, investment incentives, environmental funding and the government’s longer-term vision for farming and land management. In this edition, we explore the issues shaping decision-making for farmers, landed estates and rural businesses. Our articles consider the opportunities and challenges arising from changing government policy, developments in tax and succession planning, the future of farm profitability, strategies for diversification and investment, and practical steps businesses can take to strengthen resilience in the years ahead. As always, our aim is to provide clear, practical insight that helps rural businesses navigate change with confidence and identify opportunities for future growth. We hope you enjoy this edition.
SAM KIRKHAM Partner and Head of Farms & Estates Team
What could Andy Burnham do to raise tax... Andy Burnham has quickly taken charge of Number 10 and the newly established Number 10 North over the past few months. The next budget is set for 28 October, and therefore nervousness is growing about what tax increases we may see. There are serious challenges in the cost of living for the UK public, crumbling public services, and getting growth into the UK economy. We have already seen the prime minister launch several initiatives to ease pressure on the cost of living and general economy. These were all spending / tax cut initiatives which will need balancing in the books this coming October. The below sets out what we think you should be watching for, and whether there is anything to be focusing on in the next month. Income tax and national insurance Andy Burnham is committed to the Labour Manifesto and therefore we shouldn’t anticipate any material changes. The PM has previously raised the idea of increasing the income tax personal allowance. This would be a costly idea and is probably why, since coming to office, it seems to have been sidelined. There have been some announcements on how tax revenues will be distributed amongst central and regional governments / councils with indications we will see more money going back to the councils. Capital gains tax (CGT) In previous budgets we have seen reforms and increases to CGT rates. There is significant concern that we could see a rise to CGT rates again. Some seem to be worried that these rates could rise in line with income tax rates, but we could see this also offset by the return of some sort of indexation relief. Whilst it is usual for budgetary changes to tax rates to be applied from the start of the next tax year, if you are considering a disposal of assets and can bring forward the sales date to before Budget Day, this should be considered with appropriate legal and tax advice.
assets. This has not been repeated since his emergence as a prime ministerial candidate but could be seen as a way of offsetting the growing social care need. Reform to stamp duty land tax and council tax There seems to be traction around the idea of abolishing both stamp duty land tax and council tax and replacing this with an annual land value tax. This sort of reform could have a materially negative impact on the rural economy, and the devil would be in the detail as to whether exemptions would apply to farms, and what is / isn’t included within this tax. Wealth tax A tax on wealth has been discussed, and it seems many within the Labour Party support this type of tax. Gary Stevenson, a former city trader and prominent voice for this proposes a 2% annual wealth tax on individuals in the UK with total net assets exceeding £10m. A wealth tax would have a significant impact on farming and landed estates clients. In practice, it would also be hard to implement and manage. For those concerned with this type of tax, you could consider how your family wealth is held, but take care that tax doesn’t drive business decisions. Summary We are likely to see rises to tax in October, as currently it seems difficult to understand where the big raises will come from.
We have seen significant changes to IHT since the Labour government came into power.
By committing to the Labour manifesto, Andy Burnham has narrowed his ability to raise revenue. We can hope if we see any big change to wealth or land value tax that the government will learn from the poorly announced and managed IHT reforms and seek consultation before making decisions.
During the Makerfield by-election, Andy Burnham said that the enacted April 2026 reforms needed reviewing because they were not achieving their goals, and they were impacting family farms.
TOM STONE
Inheritance tax (IHT)
The PM has previously proposed funding a National Care Service with a care levy of 10% payable on everyone’s
Farms & Estates Team tom.stone@albertgoodman.co.uk
SMALL GIFTS - WHAT YOU CAN GIVE AWAY TAX-FREE IN THE UK Most people know about the main inheritance and income tax reliefs, however there are also some modest exemptions that are useful to businesses and individuals wishing to make tax free gifts. GIFTS BETWEEN INDIVIDUALS For gifts between individuals there is an annual exemption. Everyone can give away up to £3,000 per tax year, free of inheritance tax. This relief can be carried forward one year if not used so it could be £6,000 given away tax free within a year. There are other gift exemptions which can be used too - the small gifts exemption enables an individual to give away up to £250 to as many people as they like each year and this is completely inheritance tax free. However, you cannot give £3,000 to someone and give them the extra £250 too. If someone is getting married a parent can give away £5,000 to their child; a grandparent can give £2,500 and anyone else can give £1,000 free of inheritance tax. Charitable gifts are inheritance tax free and an individual can give away an unlimited amount to charity. Remember that taxpayers can also get gift-aid, which gives additional income tax relief. GIFTS FROM EMPLOYERS Trivial benefits can be of use to employers. Employers can give employees non-cash gifts of up to £50 each free of income tax and national insurance. For example a bottle of wine, flowers, or vouchers can be given provided the voucher cannot be exchanged for cash. These rules are very strict, so if you give something away worth more than £50 the whole amount becomes taxable. There is an annual cap of £300 per person for businesses controlled by five or fewer shareholders, so this is up to six qualifying gifts a year. Christmas parties or other functions can be paid for by employers up to £150 per head (including VAT) per tax year. This is in addition to the trivial benefits exemption. Again, this becomes fully taxable if you go over the £150 per head so be aware when undertaking events. Finally, an employer can give long service awards to employees. These are tax free up to £50 per year of service, provided the employee has completed at least 20 years and no similar award has been made in the previous 10 years. This is for non-cash awards only and for this purpose vouchers class as cash. If you are considering making gifts, you must be precise in making them and stick to the rules for them to be tax free. These smaller gift exemptions are worth using by employers and individuals each year. They are tax free to the recipient and for employers they are tax deductible. Also, there is a side benefit in that occasional £50 gifts to employees is always well received and great for motivation in IAIN MCVICAR the workplace. Managing Partner So, get the paperwork right, stay within the limits and enjoy iain.mcvicar@albertgoodman.co.uk making the gifts.
Maximising The Wages and Remuneration Package and Potential pitfalls Recruiting and retaining good workers continues to be a challenge across the agricultural sector. While pay remains important, many farms offer a broader reward package that can make a role more attractive. Understanding what can and cannot be included for minimum wage purposes is critical, particularly where employees work long hours or receive non-cash benefits such as meals or the use of a vehicle.
Holiday pay and longer working hours Agricultural workers often experience seasonal peaks that can require longer working hours. Whilst overtime can boost earnings, it can also create compliance risks if pay does not match hours worked. For National Minimum Wage (NMW) purposes, employers must consider all hours worked during the pay period. If a worker regularly works additional hours that are unpaid or under-recorded, their effective hourly rate could fall below NMW, even where their overall salary appears competitive. Holiday pay is another important consideration. Workers are entitled to statutory paid annual leave, and holiday pay should be calculated based on their “normal earnings”. For employees who regularly work overtime, this may mean including regular overtime payments when calculating holiday pay. Failure to do so could lead to underpayments and potential employment disputes.
What if meals are provided? Many farms provide free or subsidised meals, particularly during busy periods. These benefits are often appreciated by workers and can contribute to staff wellbeing and productivity. However, free meals do not count towards NMW pay. An employer cannot offset the value of meals against NMW, regardless of what the food costs the business. There is also a potential risk where employees contribute towards meals through payroll deductions. Depending on the arrangement, these deductions may reduce the amount of pay that counts for NMW purposes, potentially pushing pay below the legal minimum.
Like meals, however, the benefit of using a company vehicle generally does not count towards minimum wage calculations. A worker’s access to a vehicle, even for some private use, cannot be used to make up a shortfall in wage rates. Care should be taken to ensure the correct classification of the vehicle for tax purposes, particularly in light of recent changes with HMRC considering double cab pick-ups to be cars with few exceptions. Employers should also take care where workers contribute towards fuel, insurance or vehicle costs through deductions from pay. These deductions can affect NMW calculations and should be reviewed carefully.
The Exception: Accommodation Accommodation may be provided for employees and is one of the most valuable benefits a farm can offer. Unlike meals and vehicles, accommodation is treated differently under NMW rules. A specific accommodation offset (currently £11.10 per day) allows employers to take this figure into account when assessing NMW compliance. Because the rules are complex and the offset is capped, employers should ensure they understand the requirements before relying on accommodation as part of a remuneration package.
Final Thoughts A competitive wage package can help farms attract and retain skilled workers, particularly in a tight labour market. Benefits such as meals, vehicles and enhanced holiday arrangements may add significant value for employees, but most do not count towards NMW pay. It is recommended that employers should regularly review hours worked, holiday pay calculations and any payroll deductions to ensure NMW compliance while continuing to offer a rewarding package that supports both workers and the business.
The use of provided vehicles Providing a vehicle can be a valuable benefit, particularly where staff need to travel between sites or work in remote locations. Many farm businesses allow employees to use pick-ups, vans or other vehicles as part of their employment package.
CAROLINE JONES Head of Employment Tax caroline.jones@albertgoodman.co.uk
The importance of evidencing commerciality With many farming and estate businesses facing sustained pressure on profits, investment income and managed portfolios often keep clients in the black. Trade losses may be relieved against other income, but HMRC could scrutinise losses arising from new diversifications or established farming businesses operating on tight margins.
i. Is there an activity that results in a supply of goods or services for consideration?
Rural businesses are often closely integrated with their owners’ personal lives, blurring the boundary between business and lifestyle. During an HMRC enquiry or following a death, evidence that a business is commercial may therefore be questioned, even where losses arise only in some years.
A whole-business analysis is essential; if one activity is lossmaking, consider whether the business as a whole satisfies the ordinary commerciality test on its facts.
WHY DOES IT MATTER? If HMRC successfully argues that an activity was not carried on commercially with a view to profit, sideways loss relief against other income will be denied. Successive losses may also prompt HMRC to question whether the trade offers a reasonable expectation of profit. For farming businesses, sideways loss relief is denied where losses, calculated before capital allowances, were incurred in each of the five preceding tax years. For inheritance tax, qualifying agricultural property may attract Agricultural Property Relief (APR), subject to the limits applying from April 2026. Business Property Relief (BPR) requires evidence of a business and uses a wider concept of “business” rather than “trade”. For woodland, let property, storage and diversified estates, it is important to distinguish trading from investment activity. There must first be evidence of a business carried on for gain and managed with a view to profit.
ii. Is the supply made to obtain income? Although VAT-specific, this framework may be useful when considering other taxes.
MAINTAINING CONTEMPORANEOUS EVIDENCE HMRC may request relevant evidence when deciding whether a commercial business is being carried on. Relevant evidence can include: minutes recording active commercial decisions; business plans setting out strategy and operations; profit projections showing a realistic route to profitability; regularly reviewed cashflow and budget forecasts, including input costs and cropping or stocking plans; staff contracts, timesheets and mileage records; supplier and customer invoices and contracts. Sound commercial governance, supported by contemporaneous evidence, will make future HMRC questions easier to address. At Albert Goodman, we help clients critically review their plans so that their businesses remain robust, viable and sustainable.
WHAT IS A BUSINESS?
ABI KINGSBURY
HMRC historically used the six indicators identified in the 1981 Lord Fisher VAT case. Since 2022, its VAT policy has applied a two-stage test:
Farms & Estates Team abi.kingsbury@albertgoodman.co.uk
CAPITAL ALLOWANCES: A PRACTICAL GUIDE FOR FARMING BUSINESSES Capital allowances remain one of the most valuable tax reliefs available to farming businesses. Used correctly, they convert investment in machinery, buildings and infrastructure into significant tax savings, often in the year the expenditure is incurred. WHAT ARE CAPITAL ALLOWANCES? Capital allowances provide tax relief on qualifying capital expenditure used in a trade. Depending on the asset, relief may be available immediately or spread over a number of years. ANNUAL INVESTMENT ALLOWANCE (AIA) For most farming businesses, the Annual Investment Allowance (AIA) provides the greatest benefit. It gives 100% tax relief on qualifying plant and machinery expenditure of up to £1 million per year, reducing taxable profits pound for pound in the year of purchase. FULL EXPENSING FOR COMPANIES Companies can claim 100% first-year relief on qualifying new and unused plant and machinery through full expensing, with no £1 million cap. A 50% first-year allowance is also available for special rate assets, such as integral features and long-life assets, with the balance receiving 6% annual relief. One common trap is where assets are purchased by a holding company and leased to a trading subsidiary. In these circumstances, full expensing may not be available, so major investment should be carefully structured. 40% FIRST-YEAR ALLOWANCE FROM 1 JANUARY 2026 A new permanent 40% first-year allowance applies to qualifying main-rate plant and machinery from 1 January 2026. Unlike full expensing, it is available to both incorporated and unincorporated businesses and can apply to assets purchased for leasing. WRITING DOWN ALLOWANCES Where expenditure does not qualify for upfront relief, or where mixed partnerships include a company or trust partner, writing down allowances are available. Main pool assets such as tractors generally attract 14% relief, while special rate assets, including integral features and certain long-life assets such as solar installations, attract 6% relief. INTEGRAL FEATURES: EASY TO MISS Certain fixtures within farm buildings qualify as integral features rather than being treated as part of the building itself. Examples include: Electrical systems Water systems Air conditioning and ventilation systems
Identifying these items correctly can significantly increase the value of a claim, particularly as the building itself attracts little relief. STRUCTURES AND BUILDINGS ALLOWANCE (SBA) Where expenditure relates to the structure itself rather than plant within it, relief may be available through the Structures and Buildings Allowance. Qualifying costs can include: New agricultural buildings Building extensions Farm roads, bridges and fencing SBA provides relief at 3% per year over 33⅓ years. SPECIALIST FARMING ASSETS Some specialist assets fall into a grey area between buildings and plant. Examples include: Slurry tanks and pits Silage clamps Anaerobic digestion plants Where these assets perform a function within the trade rather than simply providing an enclosure, they may qualify as plant and potentially attract 100% relief rather than SBA at 3%. GRANTS AND CAPITAL ALLOWANCES If expenditure is partly funded by a grant, capital allowances are generally restricted to the cost borne by the business. PLAN AHEAD To maximise relief: Review annual capital expenditure to ensure all available allowances are claimed. Consider historic expenditure reviews, as missed claims may still be available. Plan the timing and structure of major projects, particularly where companies, group structures or grants are involved. Done well, capital allowances can substantially reduce tax liabilities while releasing cash to reinvest back into the farming business. NEED ADVICE? If you would like help reviewing historic expenditure, structuring a future investment or maximising your capital allowances claim, please get in touch.
ABBEY SHORT Corporate Tax team KATE BELL Farms & Estates Team
Capital Gains Tax – A Review of Reliefs Following the changes in legislation to the inheritance tax (IHT) thresholds and the restriction on both agricultural and business property reliefs (APR & BPR) to £2.5 million at 100% per person and 50% thereafter, greater consideration is now being given to gifting assets during lifetime rather than on death. However, where such gifts are made, this is deemed an event for capital gains tax (CGT) purposes with potential liabilities arising.
Rollover Relief
Gifts of cash can be made without any CGT consequences, however gifts of other assets such as property or shares will give rise to a capital gain if the value at the date of gift is greater than the acquisition cost. Where transfers take place between connected parties, these are deemed to be at market value regardless of any actual amount paid. This potential liability can therefore make the option of gifting during lifetime far less attractive – and potentially prohibitive.
Similarly to holdover relief, rollover relief defers the gain arising by reducing the cost of the new asset by the level of the gain. For example:
When gifts of trading assets or agricultural property are made, the gain can be deferred and effectively passed to the recipient using ‘holdover relief’. This means the donor does not suffer any CGT on the gift, however the donee takes on their original base cost. If they then subsequently sell the asset, they will have a greater level of CGT payable – but should also have the cash to pay the tax!
The gain effectively becomes chargeable if the replacement asset is subsequently sold. Whilst the replacement asset must be brought into business use immediately upon acquisition, it does not have to be the same type of asset – for example farmland could be sold and a shop purchased.
In order to claim holdover relief, the asset must have been used within the owners sole trade, partnership or personal company (i.e. they hold at least 5% of the shares). If shares are being gifted, the company must be a mainly trading company (rather than investment), not be listed on the stock exchange and be the donor’s personal company. The trustees of a trust or beneficiary of a life interest trust can also claim holdover relief. Gifts of agricultural land also qualify. Relief is not available for gifts made to non UK residents, a settlor interested trust or gifts of shares to a company. Where assets have been used for business purposes for only part of the ownership period, or only part of the asset is used as such, the relief is restricted accordingly. Gifts to Trusts Holdover relief can also be used when transferring assets into a discretionary trust. Whilst gifts made directly to individuals can only benefit from the relief if they are trading assets or agricultural land, gifts made into a trust qualify regardless of whether they are business assets or not. Trusts can therefore be used to pass assets such as letting properties to the next generation without triggering a CGT liability on transfer, though there are other tax implications that must be considered.
Where holdover relief can be used for gifted assets, a further relief – rollover relief, can potentially be used where trading assets are sold at a gain. The relief applies where replacement trading assets are purchased using the proceeds and can be used by both individuals and companies.
Cost of replacement asset -
£100,000
Gain on old asset rolled over -
(£50,000)
Cost of new asset for CGT purposes -
£50,000
The gain available for rollover is calculated on a time apportioned basis if the asset being disposed of has not always been used for business purposes. In order to qualify for the relief, the replacement asset must be purchased within 12 months before, or 3 years after the sale of the old asset. It is a popular misconception that the relief relates to the gain on the sale of the old asset whereas in fact it is based on the proceeds received. For example: Sales proceeds -
£1 million
Cost of replacement asset -
£500,000
Proceeds not reinvested -
£500,000
If the net proceeds are reinvested in full, the gain can be fully deferred. If however only part of the proceeds are reinvested, the tax payable is calculated based on the proceeds not reinvested. As such, if the gain is lower than the proceeds not reinvested, rollover relief is generally not beneficial. Where an individual holds an asset that is used within their personal trading company, or within a partnership in which they are a partner, the relief can be claimed. The types of assets that can be acquired using rollover relief are as follows:
Land and/or buildings used within a trade Fixed plant or machinery that does not form part of a building Depreciating assets – these are assets with a life expectancy of 60 years or less at the date of purchase Where depreciating assets are acquired, the cost of the new asset is not reduced by the deferred gain. The relief applies for 10 years or until the asset is sold or removed from business use and after that point, the gain comes back into charge and the tax becomes payable. If a nondepreciating asset is purchased before the gain becomes chargeable, the deferred gain can be rolled into this further replacement. For both holdover and rollover relief, where a gain is deferred and later comes back into charge, CGT is payable at the rate in force at that date – not the rate at the time the assets were initially gifted or sold. Therefore if a gain arises when the rate of CGT is low, it may be preferable to pay the tax rather than defer and risk paying more at a later date. For assets that are unlikely to be sold in the future, the reliefs can be very beneficial. Private Residence Relief (PRR) Another valuable relief is PRR, available on the sale or gift of a dwelling that has at some point been used as the vendor’s main residence. The entire gain can be relieved where the property has always been occupied as such, or partial relief can be available where there have been periods of non-occupation. This can mean that provided the donor survives 7 years after the date of gift, and retains no benefit in the property, a potentially valuable asset can be removed from the estate tax efficiently.
CHANGES TO THE CAPITAL GOODS SCHEME In the last newsletter I talked about some of the potential VAT issues associated with land and property, one of which was the Capital Goods Scheme (CGS). As a quick reminder the CGS is a mechanism that adjusts the initial VAT reclaimed on higher value VAT bearing capital land and property expenses if the asset is sold or there is a change to business use within ten years. This can be an advantage if taxable business use increases, e.g. a property that was originally a residential let being changed to a holiday let, but if taxable business use drops some of the VAT originally reclaimed may have to be paid back to HMRC. At the time of writing the previous article the CGS applied to a capital asset where the VAT bearing costs were £250,000 or more (excluding VAT). It covers the purchase of land and constructing, altering or extending buildings, potentially bringing many agricultural buildings within its scope. From 29 July 2026 the limit has been increased to £600,000 (excluding VAT).
Business Asset Disposal Relief (BADR)
The new limit is not retrospective so land or buildings falling within the CGS prior to the change will remain in the scheme and changes in use, or disposal, could mean VAT has to be paid or could be reclaimed from HMRC.
BADR is available where assets are sold that coincide with the cessation of the trading business, or where the business itself is disposed of. The sale of shares in a company also qualify providing the company is a trading company and the seller holds at least 5% of the shares prior to sale. The assets must have been held by the vendor for a period of at least 2 years.
Where no capital expenditure was incurred on a capital item before 29 July 2026 it is likely the new limit will apply. It is important to remember in some cases, e.g. refurbishment, HMRC say relevant capital expenditure includes professional fees such as architects, so working out if the CGS applies may not be straightforward.
The effect of the relief is to reduce the rate of tax from 24% to 18% on gains of up to a lifetime limit of £1 million per person.
The CGS threshold has remained unchanged since the 1990s so while it may be questionable whether the change adequately reflects the increase in costs and values since that time it will mean the CGS will affect fewer assets in future. Even so the VAT implications of changing the use of, or disposing of land or buildings, should still be considered at an early stage as other issues, such as the option to tax, may be relevant.
Summary With the changes to the IHT reliefs prompting many to consider their options, taking advantage of the CGT reliefs to avoid being taxed on gains is becoming an increasingly important part of estate planning.
LIZ JONES Farms & Estates Team liz.jones@albertgoodman.co.uk
RICHARD TAYLOR VAT Senior Manager richard.taylor@albertgoodman.co.uk
AVERAGING – a useful tax tool for managing volatile profits Most farmers are all too familiar with how volatile profits can be in agriculture. Income can swing wildly from year to year due to factors outside our control such as weather or disease; commodity prices we have little influence over, unpredictable input costs, and ongoing changes to agricultural policy and support. Farmers’ averaging is a useful tax tool designed to smooth taxable profits across years. Used well, it can save tax and help with cashflow. Who Can Use Farmers’ Averaging? Farmers’ averaging is only available to sole traders and partnerships. It is not available to companies. This is because companies pay corporation tax at more consistent effective rates (currently ranging from 19% to 26%), whereas effective personal tax rates for individuals can vary dramatically — from 0% up to an effective rate of 62%. Averaging applies only to farming taxable profits after capital allowances. Any non-farming income must be separated out first. It is entirely optional, and farmers can choose whether to: Not average at all Average over two years Average over five years Eligibility requires profits in the current year to differ by more than 25% from the comparison year. Key Things to Consider When deciding whether averaging is worthwhile, the main factors are: Whether profits are higher or lower this year What tax rates were paid in previous years The impact on payments on account for future tax years Future profitability of the business National insurance implications
this still meant high profits pushing them into higher tax bands, including the 62% effective rate where the personal allowance is clawed back when income exceeds £100,000. If profitability has reduced, there may now be scope to pull profits from earlier high-tax years into a lower-tax year. For example, if a partner has £20,000 of spare basic rate band, moving income from a year taxed at over 40% into a year taxed at 20% could save around £4,000 in income tax per partner. However, increasing taxable income in the current year can increase payments on account, meaning the cashflow benefit may be delayed unless further planning is done. When Profits Are Higher For farmers who have seen a spike in taxable profits — perhaps due to lower qualifying expenditure to claim capital allowances on — averaging can be particularly valuable. Where previous years were taxed at the basic rate of 20%, profits can be pushed back into those years, saving income tax that would otherwise be paid at higher rates, such as 40%. This lower taxable profit in the current year will also automatically reduce upcoming payments on account, which can result in significant cashflow savings in January and July. If profits continue to rise in future years, these reduced payments on account will not attract interest, as they have not been manually reduced. Final Thoughts Farmers’ averaging is not a one-size-fits-all solution. Every business and individual’s circumstances are different, and finding the most tax-efficient approach can be something of a puzzle — sometimes involving amendments to earlier years’ tax returns. Extra care is needed where losses or pension contributions are involved. That said, when used correctly, farmers’ averaging can be a powerful way to manage volatile profits and reduce tax, making it well worth reviewing as part of your wider farm business planning.
When Taxable Profits Are Lower Unfortunately, with the prolonged drought reducing yields for arable farmers and blue tongue impacting livestock farmers, profits may well be down this year. Averaging may already have been used to spread profits, but for some
KATE BELL Farms & Estates Team kate.bell@albertgoodman.co.uk
FARMING ROADMAP 2050: What Does It Mean for Your Farming Business? The Government has published its Farming Roadmap 2050, setting out a long-term vision for a farming sector that is profitable, productive, sustainable and resilient. The roadmap aims to provide greater certainty for farmers, enabling businesses to plan, invest and adapt with confidence.
Consider whether new technology could reduce labour, fuel, fertiliser or input costs.
The recent drought and Bluetongue outbreak has added further challenges to most farming businesses in recent months.
Review participation in SFI, Countryside Stewardship and other environmental schemes.
The roadmap confirms that producing food remains the primary purpose of agriculture while recognising the important role farmers play in environmental management and rural growth. The roadmap states Government policy will place greater emphasis on improving farm profitability through productivity gains, innovation, skills development, better supply chains and improved business performance. Future farming policy is expected to integrate environmental outcomes more closely into farm businesses, including soil health, water quality, biodiversity and climate resilience.
What Should Farmers Be Thinking About Now? Reviewing business performance and benchmarking against others.
Explore available grant funding for productivity improvements.
3. Integrate Environmental Opportunities
Assess opportunities for biodiversity net gain (BNG), nutrient neutrality and carbon projects, if appropriate. Ensure environmental activities complement rather than compromise core farming operations.
4. Strengthen Business Resilience Consider exposure to market volatility, extreme weather and supply chain disruptions. Review cropping, livestock and marketing strategies. Maintain adequate working capital and borrowing facilities.
5. Develop a Long-Term Business Plan Prepare a strategic plan looking five to ten years ahead. Consider future capital requirements and investment priorities. Ensure plans remain viable under different support payment and commodity price scenarios.
Exploring opportunities to improve productivity and efficiency.
6. Focus on Skills and Management
Considering how environmental schemes and natural capital markets fit within long-term business plans.
Encourage staff development and succession of key skills.
Investing in skills, technology and succession planning. Ensuring businesses are resilient to both policy and market changes. The Farming Roadmap is a long-term strategy, but there are several practical steps farm businesses can take today to position themselves for future opportunities and challenges.
1. Review Business Performance Benchmark financial and physical performance. Identify areas where productivity and profitability can be improved. Regularly review budgets, margins and cash flow forecasts.
2. Invest in Efficiency and Technology Evaluate opportunities for precision farming, automation and data-driven decision making.
Invest in management training and business skills.
7. Review Succession and Ownership Structures Assess whether existing ownership and business structures remain fit for purpose. Review partnership agreements, arrangements and wills.
shareholder
Consider succession planning early to support business continuity and future investment.
8. Explore Diversification Opportunities Assess opportunities to generate additional income streams that complement the core farming business. Consider renewable energy, tourism, processing, storage or specialist enterprises where appropriate. There is lots to consider and collaborating with your trusted professional advisory team, including land agents, solicitors, consultants and accountants will help to ensure that your business can adapt to be as successful as possible.
JAMES BRYANT Farms & Estates Team
When is a van not a van? It sounds like a simple question, but getting the answer wrong can have significant tax consequences. A vehicle classified as a van rather than a car can benefit from more favourable tax treatment, including potentially lower Benefit in Kind (BIK) charges and more generous capital allowances. But the distinction isn’t always straightforward. HMRC’s test is whether a vehicle is “primarily” constructed for carrying goods. Add a second row of seats, however, and that primary purpose can suddenly be called into question. This came into sharp focus with the Coca-Cola case (Payne & Ors (Coca Cola) v R & C Commrs [2020]) which considered a Vauxhall Vivaro and two types of VW Kombi vans. The Court of Appeal concluded that the vehicles were cars for BIK purposes because they were not constructed for the primary purpose of carrying goods. Although the case arose in the context of BIK, its importance goes further. HMRC now refers to the Coca-Cola decision in its capital allowances guidance when considering whether a vehicle is a car or a vehicle primarily suited to carrying goods. And then came the double-cab pick-up… Double-cab pick-ups (DCPUs) had historically been treated differently. HMRC’s long-standing one-tonne payload VAT test allowed many DCPUs to be treated as commercial vehicles for benefit-in-kind (BIK) and capital allowances purposes. From 6 April 2025, that special treatment was removed. DCPUs are now assessed using the primary suitability approach, bringing their treatment in line with the CocaCola case. As a result, most DCPUs are now treated as cars for BIK and capital allowances purposes. But importantly, nothing changed for VAT. The one-tonne payload test remains in place for VAT. So, a double-cab pick-up can potentially be a car for BIK and capital allowance purposes, but a commercial vehicle for VAT. What about vehicles you already have? This is where the transitional rules become important.
For double-cab pick-ups purchased, leased or ordered before 6 April 2025, the previous BIK treatment can continue until the earlier of: Disposal of the vehicle Expiry of the lease 5 April 2029 But there are some important traps: Replacing like-for-like? The replacement vehicle does not automatically inherit the old treatment. Changing your lease? A new lease can bring the vehicle within the new rules. Part-exchanging? Disposal of the existing vehicle ends its transitional treatment. Renewing a lease? Even leasing the same vehicle again after the original lease expires can mean it is treated as a car. And what about capital allowances? This is another area where replacing an existing vehicle could have a significant impact. A new double-cab pick-up purchased now will generally be treated as a car for capital allowances. That means it will not qualify for AIA or full expensing. Instead, relief will generally be given through writing-down allowances. So, replacing an old DCPU with another one may look like a straightforward “like-for-like” replacement, but the tax treatment could be very different. The takeaway If you’re thinking about changing, replacing or renewing your commercial vehicle, come to us first. A quick check of the specific make, model and proposed arrangement could prevent a costly tax surprise.
KATE HARDY Farms & Estates Team kate.hardy@albertgoodman.co.uk
ELECTRIC CARS AND MILEAGE RATES As electric vehicles become increasingly common across farms, estates and rural businesses, it is important to consider the most tax-efficient way to obtain relief for both running costs and vehicle purchases.
However, where the vehicle is owned by the business, running costs such as electricity, insurance and repairs must also be apportioned between business and private use, making record keeping particularly important.
PRIVATE CARS
COMPANY CARS AND BENEFIT-IN-KIND
Where a sole trader, partner or director uses their own car for business journeys, HMRC allows tax relief using its approved mileage rates.
Where a company provides an electric car to a director or employee and private use is permitted, a Benefit-in-Kind (BIK) charge arises.
From 6 April 2026, the rate increased from 45p to 55p per mile for the first 10,000 business miles, with 25p per mile applying thereafter. This represents the first increase since 2011.
The rates for fully electric cars are: TAX YEAR
BIK RATE
The rates apply regardless of whether the vehicle is electric, petrol or diesel powered and are intended to cover all motoring costs, including:
2026/27
4%
2027/28
5%
2028/29
7%
Fuel or electricity
2029/30
9%
Repairs and servicing Insurance Road tax Depreciation For electric vehicles, the actual charging cost is often significantly less than 55p per mile, making this a potentially attractive and simple option.
These rates remain significantly lower than the 25% to 37% BIK rates applying to petrol and diesel cars dependent on their emissions. For example, an electric company car with a list price of £40,000 would give rise to a taxable benefit of £1,600 in 2026/27 (4% × £40,000).
BUSINESS OWNED VEHICLES
The company must also pay Class 1A National Insurance on the taxable benefit at 15%.
Businesses purchasing electric vehicles can benefit from favourable capital allowance reliefs.
WHICH OPTION IS BEST?
A 100% First Year Allowance (FYA) remains available for new and unused zero-emission cars, allowing the initial cost to be relieved in the year of purchase. Where there is private use, sole traders and partnerships can only claim relief on the business-use proportion of the cost. For example, a £40,000 electric car with 75% business use would generate tax relief of £30,000.
There is no one-size-fits-all answer. Where business mileage is high and charging costs are relatively low, claiming the 55p mileage rate can be surprisingly tax efficient. Conversely, businesses purchasing a new electric vehicle with predominantly business use may benefit more from the immediate tax relief available through the 100% First Year Allowance. Reviewing both options before purchase can help ensure the most tax-efficient outcome.
Second-hand electric cars do not qualify for the FYA but can qualify for Writing Down Allowances (WDA’s), for 2026/27: Cars emitting 50g/km of CO² or less qualify for a 14% WDA’s. Cars emitting more than 50g/km of CO² qualify for a 6% WDA’s. Businesses can also claim 100% relief on qualifying charging infrastructure installed at farms, estates and other business premises.
SARAH LEMON Farms & Estates Team sarah.lemon@albertgoodman.co.uk
HOLDING LAND IN A PENSION – Is it still the right choice?
For many years, Self-Invested Personal Pensions (SIPPs) have been a useful tool to hold agricultural land because they offered several tax advantages. This includes: Any appreciation in land value is free from Capital Gains Tax Rental income paid into the pension is not subject to income tax The farming business can claim tax relief on rent paid to the pension for use of the land. Unused pensions have been free from Inheritance Tax (IHT)* *However, changes announced in the 2024 Autumn Statement means unused pensions will be subject to IHT from April 2027. Importantly, land held inside a pension will not qualify for Agricultural Property Relief (APR) or Business Property Relief (BPR) even if it is in agricultural use. This means land held in a pension could face IHT of up to 40% on death, something that was not previously a concern under the old rules. As a result, many people are now reviewing whether holding land in a pension still makes sense for them and are looking at ways to extract cash or assets from their pension.
TAKING A TAX-FREE LUMP SUM Most people can take up to 25% of their pension tax free (subject to the maximum of £268,275), as long as they are aged 55 or over (increasing to 57 from 2028). This opportunity is lost if it is not used during their lifetime as it does not pass to a beneficiary upon death. If the owner dies before they reach the age of 75, the pension passes to the beneficiary tax free, meaning draw downs are not subject to income tax. Should they die after the age of 75 the pension income is taxable on the beneficiary. The difficulty for pensions owning land is that this tax-free cash must be paid in cash. Where a high proportion of the pension value is tied up in land, there is often not enough spare cash available to take the full 25% tax free amount to purchase the land from the pension. To aid liquidity in the pension to fund tax-free cash, the SIPP could borrow up to 50% of its net asset value. The SIPP could then use this cash/borrowing to pay the 25% tax free lump sum to the individuals. PARTIAL WITHDRAWALS Some people choose to take the 25% tax free lump sum over time, drawing any accumulated cash now and additional cash as and when it arises (e.g. from rental payments). While this can work, it is usually slow and may require regular land valuations adding costs and complexity to withdrawing the land from the pension.
SELL THE LAND BACK TO THE FARMING BUSINESS Another option is for the farming business to buy the land back from the pension if it has the cash to do so. This gives the pension cash in return for the land sale, allowing the pension holder to then take their tax-free lump sum. The business would then own the land. In some cases, the entity may need to borrow money to purchase the land resulting in borrowing costs for the business as well as capital repayments. However, any interest payable on borrowing should get tax relief. In addition, there may well be a cash flow saving on the rent which would no longer need paying to the pension. The value of the land purchased should then qualify for APR/BPR via the business share, on the basis the entity is mainly trading, resulting in an IHT saving. The withdrawal from the pension would be IHT neutral in the first instance as the land sale would generate cash in the pension, and any unspent pension would be chargeable to IHT at 40%. However, living off the pension which then has cash to draw, would reduce value in the pension fund and therefore create an IHT saving. After the tax-free lump, any additional pension drawdowns by the individuals would be subject to income tax at the individual marginal rate of tax (20%,40% or 45%).
up cash over time to increase liquidity and facilitate a drawdown of the 25% tax free lump sum for future land purchases. While individuals and companies can continue to make pension contributions after the age of 75, such contributions for individual no longer qualify for tax relief (although companies still get corporation tax relief) and therefore individuals should seek advice before they reach this age. In addition, if the individual has drawn income from their pension, the level on contribution made is capped. Careful consideration is needed when reviewing pensions and it is important that advice is sought from a qualified financial planner. If you have a pension which holds farmland, now is a good time to consider your options. Please get in touch with us and we can introduce you to our own in-house independent financial planners.
CONTINUING TO PAY INTO THE SIPP Some people may continue to make cash contributions into a SIPP either via a limited company or as a personal contribution. This would enable the pension to build
ROSIE TURNER Farms & Estates Team rosie.turner@albertgoodman.co.uk
EVENTS Upcoming Seminars: FARMING FOCUS Albert Goodman in partnership with Clarke Willmott & Stags 5th November - 6.30pm - 9pm Tiverton Hotel Lounge and Venue
THINK WE COULD HELP, PLEASE DO CONTACT ONE OF US SAM KIRKHAM
TOM STONE
sam.kirkham@albertgoodman.co.uk 01823 250350
tom.stone@albertgoodman.co.uk 01823 250397
IAIN MCVICAR
JAMES BRYANT
iain.mcvicar@albertgoodman.co.uk 01823 250283
james.bryant@albertgoodman.co.uk 01823 250372
KATE HARDY
LIZ JONES
kate.hardy@albertgoodman.co.uk 01305 752064
liz.jones@albertgoodman.co.uk 01823 213261
KATE BELL
ABI KINGSBURY
kate.bell@albertgoodman.co.uk 01823 250286
abi.kingsbury@albertgoodman.co.uk 01823 286096
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