With the proposed changes to inheritance tax set to take effect in less than six months, almost half of farms do not yet have succession plans in place, according to an NFU Mutual survey.
The findings revealed that nearly 32% of farmers believed that a succession plan for their farm was not relevant or important to them.
NFU Mutual’s annual Voice of the Farmer survey – which heard from 1,667 farmers between March and May this year – showed that almost 18% acknowledged the importance of a farm handover plan, but had not gotten around to creating one.
However, the research highlighted a trend of more farmers starting to consider how they will hand over their farms to the next generation, as the amount of farms with succession plans in place has increased from 27% in 2020 to 38% in 2025.
Advice
As the upcoming inheritance tax reform remains a huge concern for the farming community, NFU Mutual has advised farmers on what needs to be considered when making their succession plan.
Sean McCann, who is a chartered financial planner at NFU Mutual, said: “Before the inheritance tax proposals were announced, the approach of many farmers was to gradually hand over more of the day-to-day management to the younger generation while holding onto the ownership of the assets until a later date.
“This change will prompt many to pass on the assets at an earlier stage, because if they live seven years, they would normally be free of inheritance tax.
“For that to work, it’s important that the farmer doesn’t continue to benefit from the assets they give away.
“If they intend to continue in the business, they’ll need to pay a market rent to the new owner or if in partnership with them, reduce their profit share to reflect the new ownership.”
He also noted the necessity of involving the whole family when planning succession, to understand what role each family member will play in the future of the farm, and how assets will be owned in the short-, medium-, and long-term.
Pension
NFU Mutual highlighted that the proposed changes will not only cap agricultural and property relief from April 2026, but will also make the inheritance tax net include any unspent pensions from April 2027.
According to the insurance company, this is an option many farmers “often use to pass on wealth to family members who do not want to take over the farm.”
Within the survey, 70% of farmers said that they had a pension and 64% had investments and savings.
McCann recognised the significance of pensions for older farmers, giving them an independent source of income and the freedom to take less from the farm.
He added: “This can be particularly important when two, and sometimes three, generations are relying on the farm for their livelihood.
“Because of the range of options when it comes to taking money from pensions, it’s important to take advice to ensure you don’t pay more tax than you need to.”
