Armstrong Watson’s latest Family, Privately-Owned and Owner Managed Business Survey has revealed that farm businesses are being tested by economic volatility and digital transformation.
Meanwhile, the sector is also facing additional challenges due to the impact of Inheritance Tax reforms, which could leave many with increased tax liabilities on death and threaten their ability to pass on their life’s work to the next generation.
The survey aims to gauge insights into the inner workings of family, privately-owned and owner-managed businesses and asks business owners about their people, technology, innovation and growth, as well as planning to let go.
With agriculture making up the largest group of survey respondents - 188 out of a total of 850 – the findings offer a valuable insight into the current challenges, opportunities and future outlook for farm businesses.
The majority of those in the sector who completed the survey state they are partnerships (63%) or sole traders (26%), and 10% are limited companies, with an almost equal split of businesses that are first, second, third and fourth generation.
Preparing for Making Tax Digital and the use of technology
Worryingly, although more than a quarter of the total respondents (sole traders) are likely to be impacted by the shift to Making Tax Digital (MTD) for Income Tax Self-Assessment (ITSA), more than half (53%) say they don’t yet understand the impact this will have on their business.
From April 2026, self-employed individuals and landlords with qualifying income over £50,000 will need to keep digital records and use compatible software to submit quarterly reports to HMRC. Those with income over £30,000 will need to make the switch in April 2027, before the threshold moves to £20,000 in 2028. Businesses will need to start to prepare for this shift in reporting their income and if they are unsure, we are here to support them with the transition.
The survey also highlights a potential digital gap in the sector. While there are a number of businesses embracing technology – using cloud-based platforms and other online services, industry-specific digital software or exploring options for digital technology and automation - there are still 39% who rely primarily on manual processes and have limited digital tools.
Cashflow strains and inflation
When asked about challenges over the next 12 months, 56% of agricultural businesses said they were either very concerned (14%) or somewhat concerned (42%) about cashflow and whether they will have enough to pay outgoings. Meanwhile, a staggering 84% said inflationary pressures on costs were one of the biggest economic impacts on their business. Increasing costs were also listed as the key challenge to business growth over the next three years.
Passing on family farms
The survey highlighted that while 34% plan to pass on the business to the next generation, who are already involved, more than half had not discussed their plans.
In light of changes to Inheritance Tax reliefs which are due to be introduced in April 2026, farm businesses will need to prioritise their plans for succession, particularly now that the Government has published draft legislation. We are working with many of our clients to ensure they have appropriate arrangements in place for the succession of their business.
Thank you to all those who took part in our survey. The full results are due to be published in September.
If you would like to speak to a member of our agricultural team about any of the areas above, or any other matters relating to your farm business, please call 0808 1445575 or email help@armstrongwatson.co.uk.
