Succession planning in farming – A necessary conversation for uncertain times

By Andrew Perrott, Partner and Rural Business Specialist at Monahans

The Government’s planned cap on Agricultural Property Relief (APR) and Business Property Relief (BPR), set to take effect from April 2026, has put succession planning firmly back in the spotlight

While the change in policy has understandably caused concern, it also presents an important opportunity, an opportunity to act earlier, plan smarter, and ensure the longevity of family farming businesses.

Early action makes all the difference

Historically, farming families could afford to delay succession planning because, from an Inheritance Tax (IHT) perspective, the system was relatively generous.

APR and BPR often allowed farming assets to pass to the next generation with minimal tax exposure.

That will no longer be a safe assumption from April 2026.

The new cap on these reliefs means that without proper planning, families may be facing substantial tax liabilities.

By starting conversations and mapping out succession while there’s time and flexibility, families can avoid both financial and emotional strain down the line.

Farming is a lifestyle, but structures still matter

It’s often said, and rightly so, that farming is a lifestyle as much as it is a business.

Most families I work with aren’t thinking of selling up, they're determined to continue farming, even under increased pressure. But this determination shouldn’t come at the expense of planning.

Succession is now as much about ownership as it is about farming. Families must think carefully about who owns which assets and how they’re held.

This may involve changing structures by moving assets into limited companies, trusts, or limited liability partnerships (LLPs), to manage risk and tax exposure more effectively.

While the right decision will vary by family, don’t assume that simply continuing to farm will protect your estate from tax.

The “middle” farm is most at risk

From what we’re seeing, the most vulnerable to the new IHT rules are the traditional 500 to 1,000 acre farms (mixed, arable, or livestock) that represent the backbone of British agriculture.

These businesses are often capital-rich but cash-poor, with multiple generations reliant on the farm for their livelihood.

While larger estates may have already put plans in place, many mid-sized farms have not yet done so and could struggle to fund future IHT liabilities.

Lifetime gifts – useful but complicated

We’re already seeing increased interest in using lifetime gifts to mitigate IHT. While potentially effective, such strategies come with their own risks.

Farmers need to be aware of the seven-year survival rule for Potentially Exempt Transfers (PETs) and avoid what’s known as ‘gifts with reservation of benefit’, where someone continues to benefit from an asset they’ve supposedly given away.

Even if a gift is made with the best intentions, it can become ineffective if, for example, the donor continues to live in a farmhouse rent-free.

The rules are strict and surviving seven years isn’t enough if the asset still benefits the original owner. Capital Gains Tax (CGT) can also be triggered at the time of the gift if not handled properly.

Getting the details right

The planning process needs to begin with a detailed review of what is owned, who owns it, and in what form.

From there, I guide families through careful modelling, scenario planning, and obtaining formal valuations where necessary.

One of the biggest mistakes I see is rushing into planning without a clear understanding of the numbers or failing to document gifts and changes correctly.

These oversights can undo months of work.

We approach these situations by preparing for HM Revenue & Customs’ (HMRC’s) scrutiny from the outset, ensuring all paperwork is ready, and all potential issues are understood before any changes are made.

Sometimes it’s worth paying a small amount of tax now to prevent paying much more later.

The emotional side of planning

Planning can be an emotional journey. Families often need space to talk. In many cases, the first real conversation about succession happens when I’m in the room.

My role is to offer impartial guidance and create a safe environment for difficult but necessary discussions.

Time is key. I ensure meetings are never rushed. These are major life decisions and need to be treated as such.

From experience, I've found that once families start having open conversations, it leads to better outcomes, not just financially, but emotionally too.

One family I worked with took nearly five years to complete their plan, but by the end, they were in a better place as both a business and a family.

The value of long-term forecasting

Tax forecasting is now an important part of the planning process. Even if a family isn’t ready to act immediately, understanding where future liabilities will fall enables better decision-making.

We’re working with several businesses to model these liabilities in advance, using valuations and corporate structuring to plan around known risks.

Structures that support modern farming

Trusts and LLPs are becoming increasingly important. Although trusts fell out of fashion for a time, we’re now seeing them re-emerge as a vital tool in protecting family wealth.

LLPs, in particular, offer the flexibility of partnerships with limited liability, which appeals to younger generations taking on new roles in the farm.

Whatever the structure, the most important step is ensuring it’s properly documented.

Too often, I’ve seen families move into new legal arrangements without the right paperwork, leaving them exposed to HMRC challenges.

We work closely with legal advisers to ensure every detail is correct.

Turning challenge into opportunity

With the changes set to take effect in April 2026, there is still time to act, but acting early will make all the difference.

One family I’ve worked with recently finalised a succession plan that had been stalled for years.

The changes forced them to act, and now each family member has ownership over their part of the farm and can pursue their own direction.

It's empowered them, and the business is stronger for it.

For many, these changes will bring long-postponed conversations to the fore, and that’s no bad thing.

What can be done now?

There are some early wins families can consider straight away:

• Clarify ownership – Begin with a clear picture of who owns what.
• Review Wills – Ensure they are up to date and take full advantage of allowances.
• Use income gifts – Regular gifts out of income, especially for things like school fees, can be very effective.
• Start talking – Perhaps the simplest and most powerful step is starting the conversation.

For anyone feeling uncertain or overwhelmed, the best advice I can give is talk to a professional.

Sometimes the picture is not as bleak as it first seems, and often, small changes can make a big difference.

In some cases, the planning required is complex, but it always starts with a conversation, a conversation I am happy to have with you.

If you would like explore your succession planning options or need any other financial advice relating to your farm, contact us today.

Andrew Perrott