Advice on new tax rules that affect farming families
© Adobe Stock Cuts to agricultural and business property reliefs from inheritance tax (IHT) took effect in April this year, and advisers are warning that HMRC is already asking more questions than previously, on probate and asset transfers as well as transactions in general.
This makes it all the more important that any changes are correctly documented and reported, including the reporting to HMRC of gifts and other transactions.
See also: Why changes to farm businesses need to heed separation rules
With so much farm business restructuring having taken place since the series of IHT relief cut announcements, in many cases this reporting will need to be done on tax returns for the year ended 5 April 2026.
It extends also to the administration of the estates of those who have passed away since 6 April.
Families have already had to deal with complex and often bewildering tax planning, which has been extremely stressful and at significant cost, so it is critical that they get the reporting of transactions right, says Mike Butler, a partner in accountant PKF Francis Clark. Â
Getting the paperwork right will be crucial in helping to avoid scrutiny by HMRC, and where it does ask questions, will help minimise the stress and time involved in dealing with inquires.
- Transactions, especially disposals of assets, must be correctly reported on forms to ensure the planning is effective from a tax perspective
- Elections for capital gains tax (CGT) holdover relief on gifts should be made, correctly and in time, to avoid the donor triggering the CGT liability at the time of the gift
- Stamp duty land tax (SDLT) is a complex tax, often overlooked, so where land and property have been transferred, get professional advice on whether SDLT reporting is needed and the extent of any liability, or whether a deferral is needed.
- Gifts with reservation of benefit (GWROB) are where assets are transferred without any impact on the donor – ie, they continue to use or benefit financially from what they have given away. Among the most common examples in farming are parents gifting land to their children while continuing to use and/or earn from that land without paying their children a market rent for it. Partnership property transfers and changes in partnership profit shares may also be caught by GWROB rules. Care must also be taken with gifts of shares in farming companies and related dividends.
Where a taxpayer has insurance for fees related to HMRC inquiries, they should check the policy is appropriate and up to date, says Mike.
If they have no such cover, they should consider whether to implement one. Â
Lower rates of CGT relief on sales of business assets
For those taking a step back from business or retiring completely and selling up, the tax outcome was made less generous from 6 April this year.
Business asset disposal relief, which was previously called entrepreneurs’ relief, offers a reduced rate of CGT to business owners when they sell a business, or shares in their business, compared with the normal CGT rates.Â
For disposals made on or after 6 April this year, the CGT rate on these assets rises to 18% (previously 14%). This follows a rise from 10% to 14% in April 2025.Â
Do you need to make voluntary Class 2 NI contributions to ensure full state pension?
Up to 800,000 self-employed taxpayers may have gaps in their national insurance (NI) records, meaning they will not be entitled to the full rate of state pension, currently £241.30 a week or about £12,548 a year.
Full pension requires about 35 qualifying years of national insurance (NI) contributions and HMRC is contacting those whose contributions record may have gaps, offering them the chance to make voluntary Class 2 contributions as far back as 2015-16. This is longer than the usual six-year time limit.
These voluntary contributions can be a relatively low-cost way of increasing the state pension entitlement – the current class 2 contribution rate is £3.65 a week, with slightly lower rates applying in previous years.
The issue mainly affects some people who registered as self-employed between 2015 and early 2024 but were not correctly linked to HMRC’s NI system, says tax advisory firm Ross Martin.Â
About 20% of those affected have already reached state pension age or are within two years of it, says HMRC.
A person’s NI record can be checked on their personal tax account, accessed through the government gateway used to complete their self-assessment tax return.
Here, individuals can see their state pension forecast and NI contribution history.
Taxpayers should also check that any NI credits, such as those relating to caring responsibilities, have been correctly recorded, as missing credits could affect their qualifying year total, advises Ross Martin.
Compulsory direct debit payments for VAT and PAYE payments
The government is consulting on proposals to make most VAT-registered businesses and employers pay VAT and PAYE by direct debit, with the aim of reducing late payments and simplifying the payment process.
Current PAYE legislation requires employers with at least 250 employees to make electronic payments, including by direct debit.
Exceptions to the direct debit requirement may be made for those who are digitally excluded for reasons including religious beliefs, disability, age or remote location.
The consultation runs until 16 August 2026.
Responses can be made directly online or by emailing payeconsultations@hmrc.gov.uk.
Send postal responses to Anne Hurst, Liverpool Regional Centre, 8A, India Buildings, 31 Water Street, Liverpool L2 0RD.
In-year income tax payments from 2029?
A further consultation aimed at speeding up income tax payments has just closed.
The government proposes that from 2029, taxpayers completing income tax self-assessment (ITSA) forms will be required to forecast their tax liability through the year and pay in stages as the year progresses.
About one-in-five ITSA tax bills are paid late, says HMRC. However, the proposal has been roundly criticised by the Association of Chartered Certified Accountants (ACCA).
It says requiring taxpayers to forecast their liability in-year is inherently problematic for businesses whose profits fluctuate, and particularly damaging for those in agriculture, retail, hospitality and construction.
Poorly designed forecasting requirements will inevitably lead to widespread overpayments and underpayments, which will create cashflow difficulties for exactly the kinds of small businesses the proposals are supposed to support, says the ACCA.
