Succession planning is important for any business owner when considering an overall exit strategy, but it is particularly important for family-owned farming businesses.

Succession ensures the continuity of leadership and the preservation of the farm’s legacy across the family generations.

However, this process is not just about choosing the right successor – it also involves understanding legal and tax implications.

What is succession planning?

Succession planning is the process of identifying and developing new leaders who can replace old leaders when they leave, retire or die. It increases the availability of experienced and capable employees who are prepared to assume these roles as they become available.

For family businesses, succession planning can be a sensitive issue, often caught up with family dynamics.

Family members and other shareholders may not agree with your business plans and could potentially disrupt negotiations. If there are tense disputes involved, mediation from a legal representative may be required.

What are the legal and tax implications of succession planning?

The legal and tax implications of business succession can be highly complex, depending on the structure of the farm and the method of succession.

For example, Capital Gains Tax (CGT) may be due if the farming assets have increased in value.

However, certain reliefs such as Business Asset Disposal Relief (BADR) – which reduces the tax rate on gains on qualifying assets – may be available.

Additionally, Agricultural Relief (AR) and Business Relief (BR) can provide relief from Inheritance Tax (IHT) on business assets. This relief can be passed on while the owner is still alive or as part of their Will.

However, major changes to AR and BR rules are set to be implemented from April 2026.

Under the new rules, the first £1million of qualifying agricultural or business assets will still enjoy 100 per cent IHT relief, but values exceeding this threshold will only receive 50 per cent relief.

This could have a significant impact on how farmland and assets are passed between generations, particularly as it is anticipated that the £1million allowance will not be transferrable between spouses. This could mean if married farming couples simply pass assets to each other on death, they will lose one of the allowances, leaving an even larger liability to IHT.

Ensuring compliance

As family enterprises often rely on AR and BR to pass down assets tax-efficiently, careful estate planning will be essential to minimise exposure to IHT and protect the legacy of family-owned assets – all while remaining compliant with your legal obligations.

You may wish to consider restructuring how your assets are held to manage increased liabilities and potentially move assets between relatives earlier than upon death. In some cases, it may be possible to start the early disposal of assets to ensure the estate has the means to meet a larger-than-expected tax bill.

Given the complexity of the legal and tax implications of business succession, we always recommend you get professional advice when planning a business exit to ensure all your legal obligations are fully understood and any available tax reliefs are utilised effectively.

An expert corporate solicitor can help to structure the succession in a tax-efficient way and ensure compliance with all tax obligations.

Leading legal advice in agriculture 

At Ansons Solicitors, we have many years of experience advising on all aspects of agricultural law and provide the complete range of corporate and commercial legal services.

Led by recognised agricultural specialist Neil Faunch, our expert agricultural law team regularly act for owner-managed farming businesses.

In matters of succession planning, he is supported by Rebecca Head, Satnaam Kaur and Neil Jones of the Ansons’ Business Succession Planning Team.

We can advise you on all legal aspects of your farming business and help you prepare a succession plan that is tax efficient and legally compliant, corporate and commercial solicitors based in Sutton Coldfield, Cannock, Lichfield and Dudley are available to help you with all aspects of your business transactions.

For further advice on exit strategies and succession planning, contact our expert solicitors today.