What is farmers’ averaging and how can it help me?

Farmers’ averaging lets you spread farming profits over a two or five year period. This can lower tax bills where profits move up and down due to yields, prices or weather, by smoothing income for tax purposes.

Do I qualify for Agricultural Property Relief (APR) or Business Property Relief (BPR)?

Eligibility for APR or BPR depends on how the land and buildings are used, how the farm is managed and who owns the assets. A detailed review of your farming operation is needed to confirm the level of relief available.

How should I structure a diversification project for tax purposes?

The best structure depends on the type of venture, such as holiday lets, a farm shop or renewable energy. Each may be treated differently for VAT, income tax and inheritance tax, so advice is needed on whether to keep it within the existing farm or run it separately.

What expenses can farmers claim for tax relief?

Farmers can usually claim day-to-day costs such as seed, feed, fertiliser, sprays, vet fees, repairs, insurance, utilities and wages. Larger items like machinery and equipment are normally claimed via capital allowances rather than as general expenses.

Do I need to register for VAT as a farmer?

Many farms exceed the VAT registration threshold, but even below it, registration can be worthwhile because VAT on many costs can be reclaimed. However, diversified activities can have specific VAT rules, so individual advice is recommended.

Farm Tax Planning Lincolnshire | Agricultural Accountants Lincolnshire

Why Farm Tax Planning Matters

Effective planning is essential to ensure the protection and growth of your wealth and business. Agricultural businesses face challenges that many other sectors don’t:

Fluctuating commodity prices and unpredictable weather
Large capital outlay on land, buildings and machinery
Multi-generation family involvement and succession considerations
Complex rules around agricultural and business property reliefs

Without proactive planning, you may miss out on valuable reliefs or pay more tax than necessary. The right advice at the right time can help you:

Smooth out variable profits using tools like farmers’ averaging relief
Maximise capital allowances on machinery and equipment
Plan ahead for inheritance tax and succession
Structure diversification projects in a tax-efficient way

Understanding the tax implications and wider taxation issues is essential for long-term success.

Without proactive planning, you may miss out on valuable reliefs or pay more tax than necessary. Our team provides insights to help clients make informed decisions and identify areas for improvement, ensuring your business is well-positioned for the future.

Working with advisors who have depth of knowledge in farm tax planning brings the benefit of tailored strategies that support your ongoing success.

Our Farm Accounting & Tax Services

We provide a full range of tax and accounting services tailored to farmers and landowners in Lincolnshire, including:

Our team can provide advice and assist with a range of government schemes relevant to Lincolnshire farmers, ensuring you understand and benefit from available initiatives.

1. Annual Accounts and Tax Returns

Preparation of farm accounts
Completion of self assessment and partnership tax returns
Corporation tax returns for farming companies
Compliance with Making Tax Digital requirements

We’ll explain the figures in plain English and highlight opportunities to improve future results.

2. Farmers’ Averaging and Income Smoothing

Farming profits can vary significantly from year to year, due to yields, prices, input costs and grants. HMRC allows eligible farmers to use averaging relief to spread profits over multiple years, which can reduce overall tax liabilities when profits fluctuate.

We can:

Review your historic results and future outlook
Assess whether averaging claims would reduce your tax
Prepare and submit the necessary elections and calculations

3. Capital Allowances and Investment Planning

Investment in machinery, equipment, vehicles and certain buildings can qualify for capital allowances, including the Annual Investment Allowance, which can offer generous upfront tax relief. Planning for capital investments is essential to ensure efficient use of allowances and to support your farm’s long-term growth.

We’ll help you:

Identify qualifying expenditure
Time major purchases tax-efficiently where possible
Make full use of available allowances and reliefs

4. Inheritance Tax and Succession Planning

For many farming families, the farm is both home and business – and often the main asset to pass on to the next generation. Careful inheritance tax and succession planning is essential.

We can advise on:

How Agricultural Property Relief and Business Property Relief may apply to your situation
Structuring ownership of land, buildings and business interests
Lifetime gifts versus retaining assets in your estate
Wills, partnerships (including partnership agreements and succession planning for partners), tenant arrangements, and company structures in a farming context, working closely with solicitors to ensure all legal arrangements are robust

Our goal is to help you pass on the farm as smoothly and tax-efficiently as possible, while balancing the needs of all family members.

5. Diversification and Rural Enterprises

Many Lincolnshire farms are diversifying into areas such as:

Holiday cottages and glamping
Livery yards and equestrian businesses
Farm shops, cafes and events
Renewable energy projects
Land development projects

Each project can have different tax, VAT and business structure implications. It is also important to understand relevant schemes and subsidies that may apply to your new ventures, as these can impact funding, compliance, and long-term planning. We’ll help you:

Decide whether to run new ventures within the existing farm, a separate business or a company
Understand VAT registration and partial exemption issues
Plan for income tax, corporation tax and capital gains tax

Local Support for Lincolnshire Farmers

We work closely with farmers and rural businesses across Lincolnshire, including arable and livestock farms around:

Lincoln and the surrounding villages
Boston, Spalding and the south of the county
Louth, Market Rasen and the Wolds
Gainsborough, Sleaford, Grantham and beyond

We collaborate with local land agents and banks to provide comprehensive support for our clients, ensuring you benefit from a strong professional network.

Because we’re local, we understand the practical realities of farming in this area from soil types and cropping patterns to regional markets and land values. That local knowledge helps us give grounded, realistic advice. We help clients gain access to the right advice and services, drawing on our experience supporting farmers across the country.

Straightforward, Jargon-Free Advice

Tax rules for agriculture can be complex. Our job is to make them understandable and manageable. When you work with us, you can expect:

Clear explanations without technical jargon
Practical suggestions, not just theory
A friendly, approachable team who know your business
Proactive planning, not last-minute panic before deadlines

Who We Work With

We support a wide range of clients, including:

Family run farms and partnerships
Incorporated farming businesses
Landowners and estates
Contract farmers and agricultural contractors
Diversified rural enterprises

Whether your farm is long-established or you’re taking over from the previous generation, we can tailor our advice to where you are now and where you want to be.

HMRC Enquiry and Disclosure Support

Responding to HMRC enquiries and information requests, including those relating to accounts rules, SRA Accounts Rules, and regulatory requirements set by the Solicitors Regulation Authority.
Preparing technical responses and supporting calculations.
Assisting with voluntary disclosures and corrections.
Helping minimise penalties and interest where issues arise, drawing on our experience assisting other firms.

Risk Management for Firms

SDLT risk reviews across sample or targeted files, ensuring compliance with accounts rules and SRA Accounts Rules.
Recommendations to tighten procedures and checklists in line with regulatory standards.
Integration of SDLT checks into your existing workflows, supporting your legal practice in achieving compliance.
Support for internal file audits and external quality reviews, as required by the Solicitors Regulation Authority.

Training for Lawyers and Teams

Tailored SDLT training for fee earners, support staff, and your in-house legal team.
Live or online sessions using your own case examples, reflecting the unique nature of legal sector accounting.
Practical checklists and templates for day-to-day use.
Refresher sessions to cover recent and past SDLT changes.

White-Label and Behind-the-Scenes Support

We can provide advice in your name or behind the scenes, acting as a partner to your legal practice.
Clear written notes you can share directly with clients, with additional work quoted separately in relation to the original service.
Fast turnaround to fit your transaction timelines, helping your business, company, or limited liability partnership create value, achieve compliance, and maintain a proactive approach in the evolving legal market.
Our vital support has assisted many law firms, including those involved in complex deal structures, shareholders agreement matters, and sector collaborations with the law society and other firms.

Let’s Talk About Your Farm

Every farm is different, and so is every tax plan. If you’d like to understand how the current tax rules apply to your business, or you’re thinking about a major change such as land purchase, succession or diversification, we’re here to help.

Get in touch to arrange an initial discussion about farm tax planning in Lincolnshire. Call us on 03300 575 902

Important Note

The information above is general in nature and is not a substitute for personalised professional advice. Tax rules can change and their impact will depend on your specific circumstances. Please seek tailored advice before taking action.

Farmers’ averaging allows you to smooth out fluctuating profits by averaging your income over either two or five years. This can reduce your overall tax bill if your profits vary significantly from year to year. It’s especially useful for arable farms affected by weather, yield variations and grain prices.

Most working farms can qualify for APR and/or BPR, but the rules are strict and depend on factors such as land use, occupation, ownership structure and who manages the business. A detailed review is always recommended, especially for succession planning and inheritance tax.

It depends on the type of project. Some activities such as holiday lets or farm shops may fall outside traditional farming rules and could affect VAT, inheritance tax reliefs and overall tax liability. We can advise whether to keep the project within the farming business or run it separately.