Rural Intelligence Winter Spring 2026 by Albertgoodman

INTRODUCTION

Welcome to the Albert Goodman Farms & Estates Team Rural Intelligence.

As I write this we have just received the news that, after much lobbying, Treasury and DEFRA have listened and will increase the threshold from the proposed £1m allowance to £2.5M, when the new inheritance tax (IHT) measures are introduced in April 2026. This will allow spouses and civil partners to pass up to £5M of qualifying agricultural or business assets between them before paying IHT. IHT at 20% will continue to be paid on value in excess of the allowances. This will be a relief for many, but the lobbying will continue, as there will still be numerous family business owners affected by the proposed anti-growth measures.

Now the year has drawn to a close, we can take a natural pause for reflection. It was a year shaped by ongoing cost pressures, evolving tax rules, and continued change and lack of certainty on support for rural businesses. Against this backdrop, careful financial planning and timely advice remain as important as ever.

In this winter/spring edition, we share practical insights to help you navigate the months ahead — from year-end tax planning to a review of 2025 results and looking forward to the outlook for 2026 as well as tax measures impacting rural businesses. We also highlight areas where early action can make a meaningful difference before the new financial year begins.

We hope this newsletter provides clarity, reassurance, and useful guidance as you plan for the year ahead. As always, our team is here to support you with tailored advice, grounded in a deep understanding of the agricultural and rural estate sector.

SAM KIRKHAM Partner and Head of Farms & Estates Team

THE 2025 AUTUMN BUDGETWHAT IT MEANS FOR RURAL BUSINESSES

Whilst the Government’s 2025 Autumn Budget did not deliver what many feared over the course of the prolonged period of speculation, there were several important developments that impact rural businesses, most noteworthy being:

Inheritance Tax (IHT) and Reliefs — A New Landscape

The Government announced that the agricultural and business property (APR/BPR) allowance will be transferable between spouses or civil partners. This will make Will planning simpler.

Following the budget, on 23 December, the Treasury also announced that the proposed £1M allowance will be increased to £2.5M per individual, effectively £5M including spouses or civil partners from April 2026. This means a farm of up to £5M can be passed on IHT free. The balance of qualifying assets will remain relievable at 50%, so effectively chargeable to IHT at 20%. This change follows sustained lobbying which will continue as we approach April 2026.

Property-Related Measures

The government announced several measures which will impact property owners, including:

High Value Council Tax Surcharge

For estates holding high-value residential property, the introduction of a “mansion tax” charge — an annual levy on properties worth £2M or more — has been confirmed for implementation in 2028. Formal consultation is expected early this year, including on how owners and tenants will be charged, what grounds of the house will be included, whether the state of the property will be considered as part of the valuation exercise and most importantly exemptions. Clearly there will be lobbying for exemptions for farmhouses and heritage property.

Income tax rate increase

There will be a 2% increase to the rate of income tax on property income from April 2027. This will add to the continued increasing cost of letting property. Considering the timing of expenditure across 2025/26 - 2027/28, will be important.

Business taxes

With tax bands and thresholds frozen until April 2031, many more people will be pushed into higher and additional rates of income tax. Combined with an increase to the income tax rates on dividends – a 2% increase to basic and higher rates from April 2026 - the tax cost of running a business through a company will be higher. Careful consideration to the timing of dividends will be important before 5 April.

Further, the government announced a 4.1% increase in the national minimum wage/national living wage to £12.71 which results in the minimum wage now costing an employer £27,752 a year, up from £26,631 a year. The 8.5% increase in rates payable to 18-20 year olds may impact on the decision to take on younger employees.

The government will reduce the main rate writing down allowance from 18% to 14% per year from April 2026.

For expenditure incurred on or after 1 January 2026, the government will introduce a new first year allowance (FYA) of 40% for all businesses on main rate assets. Cars and second-hand assets will not be eligible.

The annual investment allowance (AIA) continues to provide a 100% write-off on certain types of plant and machinery for expenditure of up to £1M per 12-month period. Therefore, the FYA will only benefit those spending more than the AIA.

Generally, there really wasn’t much in the Budget for businesses to aid growth, which continues to be disappointing.

DID YOUR JANUARY TAX BILL FEEL TOO HIGH?

- It Might Be Time for a Review

January is rarely anyone’s favourite month — short days, cold mornings, and for many farming businesses, a tax bill that lands with a thud. If your latest payment felt uncomfortably large, or simply higher than you expected, you’re not alone. Every year we speak with farmers who only realise afterwards that there were planning opportunities they could have used to reduce their liability.

So, if you looked at your January figure and thought, “Surely that can’t be right,” now is the perfect moment to take stock.

WHY FARMERS OFTEN OVERPAY

Agricultural businesses are uniquely exposed to fluctuating profits. Weather, commodity prices, input costs, subsidies, diversification income and one off capital projects can all distort a single year’s results. Add in the quirks of the tax system — payments on account, averaging rules, capital allowances — and it’s easy to see why many farming families end up paying more than they needed.

A high January bill doesn’t necessarily mean anything was “wrong,” but it does mean it’s worth checking whether the right reliefs and structures were used.

PLANNING OPPORTUNITIES THAT COULD HELP NEXT YEAR

Below are some of the most common areas where farmers can legitimately reduce their tax exposure with the right planning.

1. Expenditure timing and allowances

Investment in plant and equipment can attract generous capital allowances, and the timing of that spend can make a real difference to your tax bill. Using the annual investment allowance (AIA) or full expensing (where available) can reduce taxable profits significantly, but purchases made just after the year end may miss the opportunity to relieve them against earlier profits.

A common surprise for many businesses arises not when they invest, but when they later dispose of an asset on which they previously claimed the AIA. Where AIA has been claimed in full, the asset’s tax value is effectively reduced

to nil, meaning that a future sale can trigger a balancing charge — particularly if the asset is not being replaced. This can create an unexpected tax cost, so it’s important to factor potential disposals into planning as well as the initial relief.

It’s also worth remembering, investment decisions should be driven by commercial need, not just tax relief. Capital allowances can be valuable, but the tax tail shouldn’t wag the dog.

Finally, it’s also sensible reviewing the timing of revenue expenses such as repairs and maintenance, and ensuring genuine costs are captured in the correct period.

2. Stock reviews

Checking that livestock, crops in store and tillages are valued correctly — and not overstated — can have a meaningful impact on taxable profits.

Valuations must always be reasonable and justifiable, and for farming businesses this typically means using the lower of cost of production or deemed cost, which is based on a percentage of market value. Taking the time to ensure stock is recorded accurately and valued on an appropriate basis helps prevent you paying tax on profits that haven’t yet been realised and keeps your year end position on solid ground.

3. Reviewing wages and family involvement

Ensuring that family members working in the business are paid appropriately can help distribute income more efficiently. It’s also worth reviewing the profit sharing ratios within a partnership, as these can be adjusted to reflect each person’s contribution and improve tax efficiency. Any changes must be commercially justifiable, properly documented, and included in the partnership agreement, since the default position without one is an equal split.

Bringing the next generation into the partnership with a modest share can also help spread income and support longer term succession planning.

4. Averaging rules

Farmers have access to special averaging rules that can help smooth out volatile profits over two or five years. If

you enjoyed strong profits a few years ago but have since seen weaker results — or vice versa — averaging may significantly reduce your tax bill. Even where it doesn’t cut the overall liability, it can still improve cash flow by lowering payments on account.

If your January payment felt high, it’s worth checking whether an averaging election was considered. If you’d like us to review your position, please feel free to get in touch.

For a more in-depth understanding, you can also read Kate Bell’s full article on our website.

5. Pension contributions

Personal pension contributions can help manage higher rate exposure and build long term financial security — something many farmers put off for too long. If your January bill pushed you into a higher tax band, a pension contribution might have reduced it.

Employer pension contributions can also be highly effective where the farming business operates through a company. Contributions paid directly by the company are usually deductible for corporation tax purposes, helping to reduce the business’s overall tax liability. As with personal contributions, they work best when planned rather than rushed at year end.

6. Business structure — should you consider incorporation?

Many farming businesses still operate as sole traders or partnerships, but incorporation can sometimes offer tax advantages, especially where profits are consistently strong and reinvested back into the business rather than withdrawn. A company structure isn’t right for everyone — and it comes with administrative responsibilities — but for some farms it can reduce overall tax, provide more flexibility in how profits are drawn, and support longer term succession planning.

If you’re wondering whether you paid more tax than necessary, or if you simply want to avoid the same surprise next year, now is the ideal time to review your position. A short conversation can often highlight opportunities that weren’t used — or identify planning steps that could make a real difference before the next year end.

KATE HARDY

Farms

& Estates Team

kate.hardy@albertgoodman.co.uk

ANNUAL TAX ON ENVELOPED DWELLINGS (ATED) – TAX ON RESIDENTIAL PROPERTY

ATED is a tax on the ownership of a chargeable interest in residential property in the UK by a non-natural person (NNP). A NNP can be a company or a partnership with a corporate partner.

If a NNP holds an interest in a residential property, whether freehold or leasehold, and the property is valued at more than £500,000 at 1 April 2022, (or if acquired after this date cost more than £500,000), then a return is needed.

Chargeable Periods and Valuations

Chargeable periods for ATED run from 1 April to 31 March, so the next return due will be for the year ended 31 March 2027. However, the main return is made in advance, so must be filed, and the tax paid, by 30 April 2026, 30 days after the start of the chargeable period.

If you acquire a property during the chargeable period, you have 30 days to file the return following completion. The potential charge will depend on the valuation/cost of the property: Value of property

£500,001 - £1,000,000 £4,600

£1,000,001 - £2,000,000 £9,450

£2,000,001 - £5,000,000 £32,200

£5,000,001 - £10,000,000 £75,450

£10,000,001 - £20,000,000 £151,450

More than £20m £303,450

Available Reliefs

Whilst there are many reliefs available which may reduce the charge to nil, the rules are complex. Reliefs include properties used in commercially run letting businesses or properties held for property development. Relief is also available for qualifying properties open to the general public in some circumstances or properties occupied by certain employees/partners, as well as farmhouses/cottages occupied by qualifying farm workers.

Farmhouse Relief - relief would be available to a director/ qualifying farm worker if they lived in a farmhouse owned by a NNP if they meet the following conditions:

1. The property must form part of the land occupied for the farming trade. That trade must be carried out commercially.

2. The property is occupied by the farmworker for the purposes of the trade. They must have substantial involvement with the day to day running of the farm. HMRC suggest that the person must work at least 20 hours on average, per week on the farm.

If a NNP wants to claim one of the reliefs, it must file a return to do so.

Some reliefs are not available when there is a non-qualifying individual (NQI) in occupation. An NQI is broadly anyone connected with the NNP.

Penalties

Failure to file correctly or on time, or to pay on time, will lead to penalties and interest charges, even where there is no tax due. For example, if a return should have been filed by 30 April 2026 and is not filed until 1 May 2027, a penalty of up to £1,600 could be charged, even if there was no tax to pay.

The rules are complex and, if incorrectly applied, can easily result in interest and penalty charges being levied.

If you are concerned that your NNP may be subject to the ATED regime then please contact us.

ISOBEL STEPHENSON Tax Manager

isobel.stephenson@albertgoodman.co.uk

P11D UPDATE FOR 2025/26

As we approach the end of the 2025/26 tax year, it’s a good time for farming and rural businesses to review any benefits provided to employees and ensure everything is in place for P11D reporting. Below is an overview of the key areas to consider this year.

1. Living Accommodation – Still a Key Focus for Farms

Many agricultural workers live on site, and the job related accommodation exemption continues to be important. Employment contracts should clearly reflect any requirement to live in tied accommodation. Where directors or family members are involved, the rules are more restrictive and require additional care. If the business pays household costs, some items may still give rise to a taxable benefit.

2. Company Vehicles – Cars, Vans and Pickups

Car and Van Benefits

Cars are taxed based on list price and emissions, while vans continue to benefit from simpler, lower fixed charges. Commuting in a van is not treated as private use, which is often helpful for farm workers. Following recent case law HMRC has reviewed the definition of a van for the purposes of a benefit in kind. Many vehicles previously considered to be vans have now been recategorised as cars. In deciding whether or not a particular vehicle counts as a car for car benefits purposes, HMRC considers every mechanically propelled road vehicle to be a “car” unless it is:

1. a goods vehicle (a vehicle of a construction primarily suited for the conveyance of goods or burden of any description)

2. a motor cycle (as defined in Section 185 Road Traffic Act 1988)

3. an invalid carriage (also as defined in that Act)

4. a vehicle of a type not commonly used as a private vehicle and unsuitable to be so used

This means that any vehicle suited equally to carry goods or passengers is now classified as a car.

Pool Vehicles

Shared vehicles can qualify as pool vehicles if strict conditions are met. This can remove the benefit in kind charge entirely, but HMRC’s expectations are tight. If you think any of your vehicles might fall into this category, it’s worth reviewing the arrangements.

Double Cab Pickups – Major Change from April 2025

From April 2025, new double cab pickups will be treated as cars for benefit in kind purposes. Existing pickups benefit from transitional protection until April 2029 (or earlier sale/ lease end). This change is likely to increase the tax cost for many rural businesses, so planned purchases may need revisiting.

3. Mandatory Payrolling of Benefits – Now Delayed to April 2027

Mandatory payrolling will now begin from 6 April 2027, rather than 2026. Most benefits will then be taxed through payroll, removing the need for P11Ds, although accommodation and beneficial loans will still require reporting for a period. Final guidance is expected later this year.

4. What Agricultural Employers Should Review Now

Vehicle use and classification, especially pickups purchased after April 2025 and vehicles classified as vans.

Employment contracts for workers in tied accommodation

Whether voluntary payrolling is worthwhile ahead of 2027

Fuel use and any private mileage

Any vehicles not currently reported that may now fall into charge

5. Director’s Loan Accounts – Interest Charges and Benefit in Kind Considerations

Where individuals borrow more than £10,000 from the company, interest should be charged on the loan. If this interest is paid to the company, it becomes taxable income for the company and is charged at the company’s marginal rate. To avoid a benefit in kind, the interest must be physically paid to the company by 6 July following the tax year.

Alternatively, the loan can remain interest free, but this will create a benefit in kind. In some cases, even after accounting for P11D reporting costs, taking the benefit in kind can be more tax efficient.

Professional advice should be sought to determine the most efficient approach in each case.

FISCAL DRAG AND INCORPORATION

JONES

Following the news in the Budget that the personal allowance and basic rate tax bands are to remain at the current levels until 5 April 2031, what is the effect of the fiscal drag on the tax paid by individuals?

The personal allowance has remained at £12,570 since 2020-21, however if this had been increased by inflation each year, based on a cumulative inflation rate during that period of 22%, it would now be in the region of £15,350 with the basic rate tax band amounting to around £46,000. A person could therefore earn £61,350 before paying tax at the higher rate - £11,080 more than at present and a tax saving of £2,216 per year. If inflation continues at a similar level until 5 April 2031, the personal allowance would have then been

around £18,700 and the basic rate tax band around £56,000. A person could earn income of £74,700 before paying tax at the higher rate – a total saving of £4,886.

With the effective personal tax rate increasing in this way, many will be asking whether there are still benefits to incorporating a business – particularly in light of the 2% increase in tax on dividends coming into effect from April 2026 and on rental and investment income from April 2027. As with most things, the answer is it depends!

A partnership of two people currently generating taxable profits of £200,000 per year will give rise to a tax liability of £30,688.60 each as follows:

This equates to £61,377.20 in total and an effective tax rate of 30.69%.

If that same business were run as a limited company and the after tax profits withdrawn in full by way of basic salary of £12,570 and the balance in dividends, from April 2026 with the 2% additional tax on dividends, the tax payable would be as follows:

Corporation tax would amount to £41,100 and the personal tax would be £14,431 each – (£28,862 in total). The total tax on the £200,000 profits generated would therefore be around £69,962 in total and an effective rate of 34.98%.

If the directors chose instead to withdraw £100,000 of the total profits by way of £12,570 salary and £37,430 dividends each and leave the balance within the business for reinvestment, the corporation tax would remain unchanged at £41,100, however the personal tax would reduce to £3,970 each - £7,940 in total. The overall tax would then be £49,040 and an effective rate of 24.52%.

If the partnership profits rose to £400,000, the position would be similar – if the business incorporated into a limited company and all the funds were withdrawn, there would be no tax benefit. If, however, a large proportion of the profits were retained within the company for reinvestment, a tax saving would arise.

The above figures are just a simple comparison of the tax payable without taking into account any additional tax planning opportunities for both individuals and companies such as pension planning, withdrawal against directors loan accounts, use of rent payments for property etc. It also assumes individuals do not have any income from other sources to take into account.

If owners are looking to grow and invest in their business, incorporation can offer significant tax benefits – particularly where profits are higher. There are however many tax implications of incorporating and advice should be sought in advance. Consideration should also be given at the outset to the succession plan and what the partners are looking to achieve in the long term – different aims will have different tax implications.

TAX YEAR END PLANNING – changes to remuneration

The November Budget introduced several income tax increases, although employment income remains unaffected in line with the government’s commitment not to raise tax for “working people”. As Sam noted in her article, the main changes relevant to owner managed businesses are:

A 2% increase in dividend tax rates from April 2026

A 2% increase in tax on rental and savings income from April 2027

These changes create some useful planning opportunities ahead of 5 April 2026, particularly for those operating through a limited company.

DECLARING DIVIDENDS BEFORE RATES RISE

Where individuals have unused basic rate band, there may be a benefit in bringing forward dividend payments into 2025/26 before the higher rates apply. Even for higher rate taxpayers, there can still be a modest saving, although this needs to be balanced against the impact on cashflow and the company’s available reserves.

If shares are held by wider family members, there may also be scope to utilise their lower tax bands, but the income shifting rules must be considered carefully.

It is also important that dividends are declared and recorded correctly so they fall into the intended tax year. Interim dividends are taxable when paid, so timing and documentation matter.

DIVIDENDS WITHOUT CASH LEAVING THE BUSINESS

March can often be a tight month for cashflow, meaning there may not be spare funds to physically pay a dividend before the year end. Dividends do not always need to be paid in cash at the time to be treated as issued, but the correct accounting steps must be followed. If this is something you are considering, we can guide you through the process to ensure it is handled properly.

ALTERNATIVE WAYS TO EXTRACT FUNDS

For some businesses, other forms of remuneration—such as rent for farmland used by the company or interest on director loan accounts—can provide a more efficient outcome. Even with the future increases to tax on rents

and savings, these methods can still compare favourably with dividends because they are deductible for corporation tax purposes.

Assuming an ability to take a mixture of rent and interest to £50,000 as remuneration from the example in Liz’s article there is an ability to save tax of £3,250. This falls to £2,250 once the increased tax rates on interest and property apply. Whether this is appropriate will depend on your circumstances, and planning needs to be done before the year end.

OTHER YEAR END CONSIDERATIONS

The writing down allowance for plant and machinery reduces from 18% to 14% next year, although this only affects businesses spending more than £1m annually, as the annual investment allowance (AIA) remains available (except for mixed partnerships).

Where the AIA is not available, there is a new first year allowance at 40%. This is on new equipment only and does not include cars. For the majority of businesses, the AIA would be preferable if it is available.

To claim capital allowances, you must own the asset within the year—an invoice alone is not enough.

For assets bought on HP, relief is available when the asset is first brought into use, not when the agreement is signed.

Plant and machinery should always be purchased for commercial reasons, not purely for tax relief.

Pension contributions can still reduce income tax, but from April 2027 pensions may fall within the scope of IHT, so the wider implications need careful thought. Independent financial advice is essential.

If you are unsure whether you are withdrawing funds from your company in the most tax efficient way, or would like to review your remuneration strategy ahead of the year end, please get in touch—we can help you explore the options and identify what works best for your circumstances.

FINANCE - ROUND UP

The past few years have seen the borrowing market change. We have had the emergence of new lenders and an increase in borrowing costs due to base rate increases.

We seem to be now getting to a position of the “new normal”, but who knows how long that will last with a changing global world.

Interest rates

The Bank of England have now cut interest rates to 3.75%, and there are wider predictions that we should see this continue to come down and stabilise at around 3% -3.5%

This is positive news for farming businesses with variable rate borrowings, as they will see a reduction in their monthly or quarterly repayments.

For savers, this will have the impact of reducing savings rates.

To fix or not to fix?

Now that rates are starting to reduce to more historically normal levels, there is the discussion again around fixing or not fixing any new or existing debt.

For those in this position it is important to consider the whole business and your exposure to interest rates.

When fixing debt, it is also important to understand early repayment charges on the debt.

Some fixed rate loans have a fixed redemption cost to pay off the loan which can be a set % of the balance, and others use market type products where the redemption cost is dependent on the interest rates at the time.

Partial amortising loans

For farming businesses taking out new debt there has been a significant rise in the number of partially amortising loans being taken out.

This loan product is a fixed commitment by the lender to lend you the money for a 5, 10, or 15-year period, but often the repayment profile of that loan is longer, typically 20 or 25 years.

These products can often be cheaper from an interest rate perspective as the bank is committing to the loan for a short period.

It is important for farming businesses to understand that at the end of the commitment period you will either have to repay the loan in full or refinance it to a new arrangement.

If you have to refinance to a new arrangement this can come with new arrangement fees, interest rate margin, valuation costs etc.

You will also have to re-prove to the bank that the business can service the debt, which if this falls at the wrong time (e.g. milk price dropping) could leave your business in a difficult situation.

In summary, finance in terms of overdraft, term loans, and HPs remain hugely important to help farming businesses grow and expand. It is important that you understand all your finance arrangements and your exposure to risk.

TOM STONE Farms & Estates Team tom.stone@albertgoodman.co.uk

2025 AND BEYOND

Looking back on farm businesses financial results for 2025 it was an excellent year for some sectors of the industry, whilst others, such as arable, remained challenging with low prices, reduced subsidies and, of course, the weather!

The long-awaited Farming Profitability Review by Minette Batters was published before Christmas. The report had 57 recommendations with emphasis on the importance of valuing farmers to safeguard national food security now and into the future. She recommends that DEFRA need to put farming at the centre of all that they do, to facilitate increased domestic production and consumption. Longer term she mentioned fairer deals in the supply chain, including regional collaboration, partnerships via the Great British Farm advisory board and a one stop shop for advice, skills and research. The overall theme is one of ensuring that there are profitable farming businesses now, and in the future. If you would like the full details, this can be found here: farming-profitability-review.pdf

DAIRY

Dairy farms overall had a very good year, milk price was high, and feed prices have been low on the back of low cereal prices. The average farm gate conventional price per AHDB topped at 46.56 pence per litre for October 2025. This led to many dairy farms making healthy profits that were well over £1,000 per cow, with some nearer £2,000 per cow.

There are still ongoing concerns with the supply of labour, high machinery prices and cash needed to invest in capital projects.

Recent milk price reductions for conventional production are causing concern for many in the industry. Cow prices from recent herd sales have remained buoyant due to those committed to producing milk and diluting their fixed costs.

There is an oversupply of milk globally. In September 2025, per AHDB, production was up 4.1% compared with September 2024, which equated to 34.1 million litres a day. Time will tell how low the milk price will go this time around but there is already talk of it going below 30 pence per litre, which is below current breakeven price for many dairy farmers, so careful planning will be necessary.

BEEF

Beef prices have continued to increase with the liveweight cattle price currently around the £4 per kg. Those rearing their own beef saw the best margin as store cattle were increasing in price in line with finished prices, therefore impacting the margin for those rearing on purchased calves or stores.

UK beef supply remains tight. The UK cattle herd size was 1% down in 2025 compared to 2024, which equates to 120,000 head

so there are no signs of the beef price falling any time soon, unless significant amounts of foreign beef are imported. Beef supply in the southern hemisphere is also tight so hopefully there will be less incentive to ship it around the world.

LAMB

Lamb prices remained over £7 per kg deadweight from midMay until September 2025 and then recovered in November but still not as high as the summer peak. According to Agriculture and Horticulture Development Board (AHDB) the number of sheep as of June 2025 was down 3.8% to 13.3 million, of which the breeding female flock was 6.43 million, the lowest level for 15 years.

With the current tight supply of lamb, early lambers are hoping that prices will stay strong for the Easter market and beyond to keep it financially worthwhile.

PIGS AND POULTRY

Poultry continues to fly with the demand for chicken and eggs very strong indeed. Producers are keen to expand as much and as quickly as they possibly can but planning issues have prevented this for some. Demand shows no signs of slowing down and the outlook for this sector looks very good.

Pig prices had been over £2/kg since 2022 but have recently dropped to below this leaving very little, if anything, in it for producers.

ARABLE

Cereals have had another poor year with prices remaining on the floor, with the current spot price for feed wheat around £172 per tonne. The future feed wheat price for November 2027 is approx £180 per tonne, so there are no signs of the price increasing significantly any time soon. With direct subsidies falling off a cliff, we will have to see what the new sustainable farming incentive agreements (SFI) will bring in 2026 and beyond.

Farmers need to continually measure their outputs and costs to manage their cashflow as well as possible. Running forecasts will help you see where and when cash will be needed. This includes planning for future tax payments for 2027 and beyond.

Are you ready for MTD-IT?

The launch of Making Tax Digital for Income Tax (MTD-IT) is fast approaching and no doubt everyone has now heard or seen a publication from HMRC or software provider relating to the upcoming changes.

Following the submissions of all 2024/25 tax returns, by now all impacted individuals should be aware if they fall into the MTD IT filing requirements. If you are unsure, please do contact us.

The table below summarises who will be impacted and when.

What to do now if you meet the criteria for filing MTD-IT returns from 6 April 2026?

1. Don’t panic - we are here to guide you through every stage of the MTD journey, from initial set-up to submissions.

2. Consider your software choices. If you are already submitting VAT returns through MTD, you will already have an MTD-IT compliant software. The quarterly MTD-IT submissions will be a separate submission from your VAT return, however, will follow a similar process.

If you do not currently use a software, we recommend using Xero for sole trade businesses or Hammock for rental income. Please do get in touch if you would like assistance with setting up an account or require any software training.

3. Sign up for MTD-IT – If you meet the criteria you will need to sign up ahead of the start date. Again, this is something we can assist you with.

4. Link your software with your MTD-IT online account.

5. You are ready to go and will need to ensure quarterly submissions are made by the deadlines explained below.

Submission deadlines

The quarterly submission deadlines are one month and two days after the end of each tax quarter. This means the first submission deadline will be the 7th of August 2026 for the quarter 6th of April 2026 to 5th of July 2026. These deadlines align with the VAT return deadlines for anyone submitting quarterly VAT returns to March, June, September and December.

Paying your income tax

to ensure you

No changes are being made to how and when your income tax is paid. Payment deadlines will continue to be the 31st of January and the 31st of July each year.

If Albert Goodman currently submit your annual selfassessment tax return, we will continue to do this, the quarterly MTD-IT returns will not replace this requirement.

What if you no longer meet the income threshold?

If your combined sole trade and property gross income exceeded £50,000 for the 2024/25 tax year but drops below this in future years, you still need to submit quarterly returns under MTD-IT.

What if you no longer operate as a sole trader and have no property income?

If your gross income exceeded £50,000 in 2024/25, however you have since ceased operating as a sole trader you will not be required to file quarterly returns under MTD-IT. You will still need to inform HMRC of this change. The easiest way to do this is to sign up for MTDIT and then remove yourself.

Please do get in touch if you have any questions or concerns regarding MTD-IT, we are here to help you.

LINDSEY JOHNSON

Farms & Estates Team lindsey.johnson@albertgoodman.co.uk

HMRC look closely at mixed-use SDLT claims

HMRC has recently lost a First Tier Tribunal (FTT) claiming the purchase of a £7.9 million property was subject to residential rates of Stamp Duty Land Tax (SDLT). The tax differential was an additional £477,250.

The decision hung on whether, at the date of completion, the Property consisted entirely of residential property; or whether it included land that was used for another purpose.

The Property, Woodmancote Place, comprised a mixed-use land and property estate, including;

A substantial 10 bed house used as a residence, with formal gardens and grounds

2 staff cottages

Courtyard including 10 stables and further equestrian facilities

150 acres of land

On the land;

Equestrian use of stables and manège (a former stud farm)

Sheep were grazed

Maize was grown

A 130 head commercial deer park on 60acres

Rural Payments Agency (RPA) compliant for Basic Payment and Countryside Stewardship Mid-Tier

HMRC’s view: The rural features of the property were typical of a countryside estate, which provides the occupier with a private, self-contained dwelling and all the necessary facilities for an active lifestyle. The land enhances the rural character of the property and provides a treasured view.

Taxpayer’s view: Land does not solely constitute grounds for the property to the extent that it is used for separate commercial purposes.

Being able to provide evidence of commercial activity undertaken before completion, and immediately after, is essential. Where possible the commercial activity should be referenced in the sales contract.

The taxpayer was successful in defending their claim that the property was of mixed-use and therefore subject to lower rates of SDLT.

The result is not surprising but the fact it had to be heard in the FTT reflects the taxpayer and HMRC’s diametrically opposed views, an observation of the judges in this case. HMRC’s reluctance to concede perhaps reflects a fundamental lack of understanding of rural property and businesses or perhaps just a reluctance to back down where there is a significant differential in tax due.

INCREASING HMRC SCRUTINY

HMRC have targets to generate revenue and reduce the ‘tax gap’. We are therefore likely to continue to see more cases of this nature being brought, not just in relation to SDLT but also other taxes.

HMRC routinely run ‘campaigns’ to encourage tax compliance and issue ‘nudge’ letters to taxpayers they suspect may need to revise their returns. Recent campaigns include encouraging correct reporting of ‘private use’ adjustments for owner managed businesses, via voluntary disclosure and amendment of returns (see our last newsletter).

Our advice regarding any enquiry by HMRC, whatever the tax, is to keep good contemporaneous evidence of commercial activity vs private use. Examples include business meeting minutes, photographs where there is a change of use or development, diary or timesheet to record time spent on business activities, mileage records to evidence business / private vehicle use.

We offer all our clients the peace of mind that our professional costs will be covered in dealing with a HMRC enquiry through subscribing for our cost effective annual ‘Tax Investigations Service’ (TIS).

If you would like to discuss TIS or take it out, please speak with your regular Albert Goodman contact.

Year-End BOOKKEEPING PROCESSES

With MTD for Income Tax in mind (see article by Lindsey Johnson), it is more important than ever to ensure your bookkeeping software is as up to date as possible.

Below is a checklist of processes to complete at year end.

Although these are tailored to Xero, many will also apply to other bookkeeping systems.

1. Bank Reconciliations

Please ensure that all transactions are fully reconciled for the year. In Xero, running a Bank Reconciliation Report will confirm this and allow you to check the calculated balance against your physical or online bank statement.

Path: Bank account > Vertical ellipsis > Reconciliation report

Please continue to reconcile post year-end transactions, as these can assist with preparing the accounts.

2. VAT Return

Please ensure that the VAT return covering your year-end has been submitted and any supporting calculations are saved.

3. Mis-postings & Duplicates

By running an Account Transactions Report in Xero, you can review all postings made during the year and identify any mis-postings or duplicate entries (for example, duplicated bills or spend money transactions).

Path: Accounting > Reports > Account Transactions

(Select your accounting period in the date range)

4. Debtors (Amounts Owed to You)

Please check your debtors using the Aged Receivables Detail report at your year-end date.

Path: Accounting > Reports > Aged Receivables Detail

5. Creditors (Amounts You Owe to Suppliers)

Please check your creditors using the Aged Payables

Detail report at your year-end date.

Path: Accounting > Reports > Aged Payables Detail

Please ensure this includes all bills dated within your accounting period that were paid after the year end.

6. Uploading Documents (Invoices / HP Agreements)

Uploading PDFs/photos of documents into Xero can ensure information is accessible and saved with the transaction in Xero.

Documents can be attached to:

Bills

Invoices

Receive/Spend Money transactions

On the reconcile screen, click “Add Details” and look for the document upload icon (paper with a folded corner).

Many suppliers now issue bills by email. Xero also allows you to email documents directly into Xero using your custom files email address.

Path: Business name > Files > Email address (top right corner)

7. Stock Sheets

We aim to issue stock sheets as close to your year-end as possible. Alternatively, please record your stock in your preferred format close to the year-end date as possible.

GRACE POPHAM Farms & Estates Team grace.popham@ albertgoodman.co.uk