Almost half of Britain’s farms are heading for a major overhaul of inheritance tax, with no clear plan for who will take over. Experts have warned that the impending gap could cause confusion for families as sweeping changes arrive in the coming months.
New data from NFU Mutual shows that while many farmers recognize the need to plan ahead, 18% acknowledge that succession planning is important but are ‘doing nothing about it’, and a further 32% say they don’t think planning is necessary. This comes despite major IHT reforms coming into force within six months.
Inheritance is often a sensitive issue and is influenced by farm size, type and number of generations involved. Farming is not just a job, it’s a way of life, and many farmers continue to work well past state pension age. Defra figures show that by 2025, 40% of UK farmers will be aged over 65, with just 5% under 35.
A lack of planning can create real financial and operational risks. Without a clear succession structure, farms can face disruption, legal disputes and forced sales, especially when increased tax burdens collide with already tight profit margins across the sector.
Succession planning has improved since 2020, rising from 27% to 38%, according to NFU Mutual’s latest Voice of the Farmer survey. However, significant gaps remain, with 57% of cattle, sheep and livestock farmers either not starting a plan or do not think it is important.
These findings come at a critical moment for the industry. The government’s inheritance tax reforms announced in last year’s autumn budget have caused widespread concern.
From April 2026, a cap will be placed on the reduction of agricultural and business properties, potentially increasing the tax burden on families who pass on farming from generation to generation.
From April 2027, unused pensions will be subject to inheritance tax, a major change for farmers who often rely on pension assets to support relatives who do not want to farm.
Sean McCann, a chartered financial planner at NFU Mutual, said many farmers had historically taken a step-by-step approach, “retaining ownership of the assets until a later date but handing over much of the day-to-day management to younger generations.”
But he said the new proposals could encourage farmers to transfer their assets sooner, adding: “If you live for seven years, there would normally be no inheritance tax.”
He warned that there are conditions attached to early transfers. If the farmer continues to profit from the transferred property, the tax relief may be lost.
Those who remain involved in the business may be required to pay market rent to the new owners or reduce their profit share if they form a partnership. McCann emphasizes the importance of involving the whole family to clarify roles and ownership in the “short, medium and long term”.
The study also shows that 70% of farmers have a pension and 64% have investments or savings, highlighting the role financial planning plays in supporting multi-generational farming.
Mr McCann said pensions can act as an independent source of income for older farmers, relieving pressure on the farm itself, adding: “This can be particularly important where two and sometimes three generations depend on the farm for their livelihood.”
With the clock ticking for reform, advisers hope more farmers will seek guidance to avoid unexpected tax burdens and ensure a smooth transition to the next generation.
