The Budget Kept the Family Farm Tax. Now Your Farm Needs an Income the Taxman Can't Squeeze
On 20 October, tractors lined up in a field near Newbury to spell out three words: "Axe the Tax."
One of the men behind that rally, Berkshire farmer Dan Willis, put his family's situation bluntly. "For me, it's unsurvivable," he told Farmers Guide. "We would have to sell." His farm business has already spent around £30,000 on legal advice trying to soften the impact of the new inheritance tax rules.
That is the fear at thousands of British kitchen tables this week: "Will our children have to sell land to pay it?"
On Wednesday 28 October, Chancellor John Healey gave his answer. His Autumn Budget brought no U-turn on farm inheritance tax. The rules that came in on 6 April 2026 stay.
So the question is no longer what Westminster will do. It is what your family will do. And one thing protects a family farm under every version of the rules: a farm that earns more cash every year is easier to keep in the family.
The short answer Since 6 April 2026, only the first £2.5 million of qualifying farm and business assets gets full inheritance tax relief. Above that, the effective rate is up to 20%, payable over 10 years interest-free. The 28 October 2026 Budget left these rules unchanged. Whatever happens next, steady income from visitors, a farm shop or events gives your family the cash to pay a bill and a reason for the next generation to stay. This is general information, not tax advice. |
What Changed on 6 April 2026 (in Plain English)
Before this year, most working family farms could pass to the next generation with no inheritance tax at all, thanks to Agricultural Property Relief (APR) and Business Property Relief (BPR).
The October 2024 Budget announced a cap. The original plan gave full relief only on the first £1 million. After a year of protests, the Government announced on 23 December 2025 that it would raise that to £2.5 million.
What | The rule since 6 April 2026 |
First £2.5m of qualifying farm and business assets | 100% relief (no inheritance tax) |
Qualifying assets above £2.5m | 50% relief, so an effective rate of up to 20% |
Married couples and civil partners | Unused allowance can pass between spouses, so up to £5m together |
Paying the bill | Equal yearly instalments over 10 years, interest-free |
Standard nil-rate band | £325,000 per person, alongside the farm allowance |
The Government says around 85% of estates claiming APR will pay no extra tax, and up to 185 estates claiming APR will pay more in 2026/27.
Farm groups say those numbers miss the point. Land values are high, cash is thin, and the uncertainty is already changing decisions. A Country Land and Business Association survey of 700 members found 90% had paused or cancelled investment because of the reforms.
What the Budget Did (and Didn't Do) for Farmers
This was the first Budget since Andy Burnham became Prime Minister. During the Makerfield by-election, he said the APR and BPR changes needed looking at again.
The pressure before the Budget was relentless. The Ulster Farmers' Union, the NFU, the CLA and the Countryside Alliance have all pressed for the changes to be reversed or rethought, and the CLA wants a full reversal. More than 100 Conservative MPs, MSPs, Senedd members and councillors signed a letter asking for the same.
In the end, the Budget left Agricultural and Business Property Relief exactly as they were. The main help for farms was on fuel, with temporary fuel duty cuts extended to July 2027. The Budget also left in place a separate change: from 6 April 2027, most unused pension funds will count for inheritance tax, and farmland held in a pension doesn't get the agricultural reliefs. The NFU and other rural groups have continued to demand a complete reversal of the farm changes.
But step back from the politics. Tax rules one government brings in, the next can rewrite. The October 2024 Budget proved that a family plan built on one tax relief can be knocked over in a single afternoon.
What no Chancellor can take away is a business that earns money from paying customers year after year.
Reality Check: Don't wait for the next Budget either. Campaigners will keep pushing, but the families in the safest position will be the ones who already know their farm's value, their likely bill and how the business could fund it. Our farm succession planning guide walks you through the first conversations. |
The Real Problem: Rich in Land, Poor in Cash
Many farms are worth a great deal on paper and earn very little in cash.
Defra's own forecasts for England in 2025/26 show average cereal farm income falling by around two-thirds, to about £17,000. General cropping farms were forecast to halve to £54,000. These are averages; many farms earn less.
Now picture an inheritance tax bill paid in 10 yearly instalments. Here is a simplified example for a single owner whose £325,000 nil-rate band is already used by other assets, such as the farmhouse or savings:
Qualifying farm assets (one owner) | Amount above £2.5m | Tax at 20% effective rate | Yearly instalment over 10 years |
£3.0m | £500,000 | £100,000 | £10,000 |
£3.5m | £1,000,000 | £200,000 | £20,000 |
£4.5m | £2,000,000 | £400,000 | £40,000 |
In the middle example, the £20,000 yearly instalment is more than the forecast average profit of a whole cereal farm.
That is why farmers talk about selling land. When the farm itself doesn't make enough to pay, the only thing left to sell is the farm.
The Long-Term Answer: Make the Farm Earn More Than It Costs to Keep
Diversified income is not a tax trick. It is the oldest protection a family business has: more money coming in, from more than one place.
Defra's Farm Accounts in England show 72% of farm businesses had some diversified activity in 2024/25, up about 10 percentage points since 2015/16. Those farms earned an average of £31,100 from it.
For 26% of diversified farms, that income was at least half of their whole Farm Business Income.
Look at that £31,100 next to the £20,000 instalment above. One steady income stream can be the difference between paying a bill from the till and paying it with a field.
Australian farmers have a name for this: drought-proofing. Here is what extra yearly income does for a farming family, whatever any Budget says:
It pays bills without selling land. Instalments, a mortgage, or a cash gift to siblings who don't farm.
It funds proper advice and planning. Mr Willis's roughly £30,000 in legal fees had to come from somewhere.
It gives your children a job, not just a field. A farm shop, a café or a school-visits programme is often the reason a son or daughter comes home.
It survives the next policy change. Subsidies, tax reliefs and payment schemes come and go. We saw the same lesson when Europe redrew farm subsidies again.
Field-Tested Play: Write down one number: your likely yearly instalment, using the table above as a rough guide. Then ask, "What would it take to earn that from visitors?" At £12 a head, a £20,000 instalment is about 1,700 paying visitors a year, or roughly 32 a week. That is takings before costs, so aim higher than the bare number. A school-visits programme, a seasonal pick-your-own or a few farm events can get you there. See real profit numbers from farms that have done it. |
Which Kind of Income? Start With What You Already Own
You don't need a wedding barn. The best first projects use buildings, land and skills you already have. Our guide to launching agritourism with only the infrastructure you already own shows how.
Good first steps for a British family farm:
Farm tours and school visits. Low cost, and they build the local following everything else depends on. See the farm experiences schools happily pay for.
Seasonal events. Lambing weekends, pumpkin patches and Christmas trees fill a calendar. Here are 30 farm events by season with real ticket prices.
A farm shop or honesty stall you run yourself. Selling direct keeps the retail price in your pocket. See why families drive out to farms to buy direct.
An old building with a new job. Your old barn may be your best asset, but read the tax warning below first.
For inspiration closer to home, the 2026 British Farming Awards diversification finalists are full of UK families doing exactly this.
The Tax Trap Nobody Mentions: Diversify the Wrong Way and You Can Lose Relief
APR only covers land and buildings occupied for agriculture. When a building or field changes to non-farming use, that asset can lose APR. It may still qualify for BPR, but generally only if it is a trading business you run, not an investment where you collect rent.
Law firm Brodies gives useful examples of where the line usually falls:
Usually treated as trading (may qualify for BPR) | Usually treated as investment (may lose relief) |
Running your own farm shop | Renting a building to someone else's shop |
Full-service livery | Renting stables and grazing to horse owners |
Running a hotel from the main house | Letting cottages out to holidaymakers |
A joint venture you take part in | Simply letting land for a wind turbine |
NFU Mutual's financial planners give the same warning: converting farm buildings and letting them for non-farming use will normally mean APR is lost.
So the order matters. Plan the income and the tax structure together, before the builders arrive.
Reality Check: Take these questions to your accountant or solicitor before you start any new venture: • Will this activity count as trading or investment for inheritance tax? • Will it affect the APR on the building, the land around it, or the farmhouse? • Should the new business sit in a separate company or partnership? • If we pass part of the farm to our children, could diversifying later trigger a clawback of relief? • How does this fit with our will, our partnership agreement and any lifetime gifts? Our list of tax questions to ask your accountant goes further. |
What I Learned on My Own Farm in Malaysia
My durian farm, Bloopy Durians, is a long way from Berkshire. Our harvest seasons are short, about four to five months a year in total. For the rest of the year, the trees don't pay the bills.
What changed things for us was not a better crop. It was people. Visitors now come from all over the world, and many companies send their staff and management to the farm. We also built a WhatsApp list of loyal customers who buy every time our durians are ready. That list has become one of our most reliable sources of income.
None of that depends on what a government decides about tax or subsidies. Policy is something you lobby for. Income is something you build.
Frequently Asked Questions
Did the 28 October 2026 Budget reverse the farm inheritance tax?
No. The Autumn Budget left the rules that took effect on 6 April 2026 unchanged. Farm groups continue to call for a reversal, and rules can change at future Budgets, so check the latest position with an adviser.
How much inheritance tax will a farm pay under the current rules?
Since 6 April 2026, the first £2.5 million of qualifying agricultural and business assets gets 100% relief. Above that, relief is 50%, giving an effective rate of up to 20%. Couples can combine allowances, so up to £5 million can pass with full relief.
Can farm inheritance tax be paid in instalments?
Yes. Tax due on qualifying agricultural and business assets can be paid in equal yearly instalments over 10 years, interest-free.
Does farm diversification affect Agricultural Property Relief?
It can. APR only covers property occupied for agriculture, so a building converted to non-farming use may lose it. Some diversified businesses qualify for Business Property Relief instead, but generally only if they are trading rather than investment, such as letting holiday cottages. Take advice before you start.
How many UK farms have diversified?
Defra figures show 72% of farm businesses in England had some diversified activity in 2024/25, earning an average of £31,100 from it.
Don't Wait for Westminster to Save Your Farm
This Budget didn't bring the news farmers hoped for. Campaigners will keep fighting, and they may yet win. But the families who keep their farms for the next 50 years will be the ones who built an income that pays its way under any rule.
Find out where your farm stands today. The free Farm Readiness Quiz takes a few minutes and shows whether your farm is ready for paying visitors, and what to fix first.
Want a step-by-step plan? Download the free 21-Point Agritourism Blueprint.
P.S. Dan Willis and hundreds of fellow farmers spelled out "Axe the Tax" with tractors because they can't picture paying the bill without selling land. The Chancellor didn't axe it. So start building the income that means your family never has to choose. Take the quiz and see where to begin.
By Stephen Loke of AgritourismSuccess.com, whose farm is featured in Bloomberg News and Asahi Shimbun. This article is general information, not tax, legal or financial advice. Facts checked after the Autumn Budget on 28 October 2026. Tax rules can change at future Budgets, so always check the latest position with a qualified adviser.
Sources
FarmingUK, "Burnham urged to reverse farm inheritance tax at autumn budget", 18 August 2026
Farmers Weekly, "Pressure mounts on Burnham for Budget farm tax U-turn", 4 September 2026
Farmers Guardian, "Budget 2026: No U-turn or change to family farm tax in Budget", 28 October 2026
ACCA, "Agricultural and business property relief", January 2026
FarmingUK, "Cereal farm incomes forecast to plunge two-thirds as support payments fall", March 2026
Brodies, "Farms and estates: diversification and inheritance tax"
Farmers Guide / NFU Mutual, "Four financial considerations before diversifying your farm"
The Scottish Farmer, "MPs urge Burnham to reverse farm inheritance tax changes"
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