Passing the farm to the next generation in 2026

Why early planning for succession is essential

Farm succession cannot be left until a transfer is imminent. Many of the key tax reliefs apply only where strict conditions are met at the date of transfer, and once missed, they are generally lost for good. In practice, late planning often results in avoidable Capital Acquisitions Tax (CAT), restricted Capital Gains Tax (CGT) reliefs or unexpected stamp duty costs, sometimes forcing families to sell land simply to fund tax liabilities.

The transferor’s position: CGT and Retirement Relief

From the transferor’s perspective, CGT is often the most immediate tax exposure on a lifetime transfer of farmland.

Retirement Relief may shelter some or all of the CGT arising on the disposal of qualifying farm assets, provided strict conditions are satisfied. Key factors include the transferor’s age at the date of transfer, the period of ownership and use of the land, and whether the transfer is made to a child or another party.

Given recent changes to age thresholds and relief limits, the timing of a farm transfer can materially affect the level of CGT relief available. Delaying a transfer may significantly restrict access to Retirement Relief.

Where land has been leased prior to transfer, careful consideration is required to ensure that the leasing arrangements do not adversely impact CGT relief eligibility.

The successor’s asset position: more than just the farm

One of the most significant risk areas for farming families is the 80% agricultural assets test required to qualify for Agricultural Relief from Capital Acquisitions Tax.

Following a transfer, at least 80% of the successor’s total assets must consist of agricultural property. This test applies immediately after the transfer and takes account of all assets owned by the successor, not just the farm.

In practice, the test is often failed because of rental or investment properties, savings accumulated from off‑farm employment, or other non‑agricultural assets. While these may appear unrelated to farming, they are fully relevant for tax purposes and can jeopardise relief.

Effective succession planning therefore requires a full review of the successor’s assets well in advance of any proposed transfer.

Farming or leasing: meeting the activity requirements

Difficulties also arise where the successor is not in a position to farm the land on a full‑time basis, particularly where they work off‑farm or live away from the land.

Agricultural Relief can still be preserved provided that, for six years following the transfer, the land is either:

• Farmed commercially by the successor.
• Leased to an active or qualified farmer under a compliant lease arrangement.

Properly structured long‑term leasing is therefore a legitimate and often practical solution. However, informal or short‑term arrangements may not satisfy the statutory requirements and can place reliefs at risk.

Where the farmhouse is retained by the transferor, Agricultural Relief may still apply provided the leased land represents at least 75% of the total agricultural property value.

Agricultural Relief: the cornerstone of farm succession

Agricultural Relief reduces the taxable value of qualifying agricultural property by 90% and, in many cases, eliminates Capital Acquisitions Tax on a farm transfer.

Given its value, it is subject to close Revenue scrutiny. Relief is commonly lost where the 80% agricultural assets test is not met, the six‑year farming or leasing conditions are breached, or the required conditions are not in place at the date of transfer.

Failure to qualify at the point of transfer is generally irreversible. Where Agricultural Relief is not available, alternative reliefs such as Business Relief may need to be considered, but these require advance planning.

Stamp duty considerations

Stamp duty and Capital Gains Tax can arise on farm transfers and should be reviewed as part of any succession plan. While reliefs may be available, they are subject to strict and often ongoing conditions and can be clawed back if those conditions are not met or if the use of the land changes. These taxes should therefore be considered in the context of the family’s long‑term plans for the farm.

Practical steps for farming families in 2026

Families considering passing the farm to the next generation should:

• Start planning early, particularly where multiple children are involved.
• Review the successor’s full asset position.
• Decide whether farming or leasing is the most appropriate structure.
• Consider how the transferor’s age affects CGT reliefs.
• Confirm stamp duty relief eligibility in advance.
• Obtain up‑to‑date valuations and maintain clear records.

Conclusion

Successful farm succession depends on early planning, careful structuring and a clear understanding of the applicable tax rules. With the right advice, farms can be transferred tax‑efficiently while protecting long‑term family objectives.

If you have any questions in relation to the above, or if you would like to discuss this topic further, please contact a member of the Forvis Mazars private client team below: