A £25,000 annual inheritance-tax instalment would equal around half the average annual Farm Business Income of an English cereal farm and more than 60% for grazing livestock farms, a comparison using Defra's 2024/25 figures shows.

Following the Autumn Budget, SE-Solicitors is encouraging farming families to look beyond the option of spreading inheritance tax over ten years and assess what each annual payment would mean for the business. The comparison uses an illustrative £250,000 liability split into ten equal payments, not a typical farm tax bill. Farm Business Income is not disposable cash, so families need to assess payments against their own costs, borrowing, investment and family drawings.

Under the current rules, inheritance tax attributable to qualifying agricultural or business property can generally be paid in ten equal annual interest-free instalments. The first payment is normally due six months after the end of the month in which the death occurred. Different rules may apply if property is sold, and tax relating to other assets may be payable sooner.

Lucy Gordon, Director and Head of Private Client at  SE-Solicitors, said: "Paying inheritance tax over ten years is a payment option, not an affordability guarantee. A farm may qualify for interest-free instalments and still struggle to generate the cash needed every year without reducing investment, increasing borrowing or selling an asset."

She added: "Before relying on instalments, families should test the annual payment against good, typical and difficult trading years, as well as existing debt, drawings and essential business costs. Spreading the liability can help with timing, but it does not make an unaffordable bill affordable."

One £25,000 annual instalment compared with average Farm Business Income

Methodology: The comparison divides an illustrative £25,000 annual instalment, the yearly payment on £250,000 spread equally over ten years, by Defra's average Farm Business Income for each English farm type in 2024/25. Farm Business Income is output minus total farm costs and represents the return to unpaid labour and capital. These are averages, not disposable cash, and individual performance varies considerably. The comparison does not calculate inheritance tax or establish eligibility for instalments. Defra, Farm Business Income by farm type in England 2024/25, updated 8 September 2026.

Why instalments do not automatically prevent a sale

She continued: "A farm may be asset-rich but have limited disposable cash. Annual payments can coincide with volatile commodity prices, repair costs, borrowing commitments or the retirement of a key family member. If land or another asset is sold during the instalment period, outstanding tax associated with that property may become payable, so families should understand the consequences before treating a future sale as a fallback plan."

Four funding checks for farming families

Lucy outlines four checks farming families should complete before relying on instalments:

1.Separate instalment tax from tax due sooner
"Start by modelling the likely liability and separating tax that may qualify for instalments from amounts that could become payable sooner. That distinction gives the family a more realistic view of the immediate cash requirement and avoids treating the entire bill as though it will automatically be spread across ten years," she said.

2.Stress-test annual payments
"Test each annual payment against good, typical and difficult trading years rather than relying on one set of accounts. Farm income can fluctuate significantly, so the plan should remain workable when prices fall, costs rise or an unexpected repair or investment is required," she added.

3.Review funding and payment responsibility
"Available cash, life insurance, borrowing capacity and existing security should be reviewed together, with a clear record of which individuals or business entities will fund each instalment. A solution that appears affordable in isolation may place pressure on working capital or create uncertainty when payment is due," she explained.

4.Plan for changes during the ten years
"Families should consider in advance how a sale, refinancing or change of use during the instalment period could affect the outstanding tax. Treating a future disposal as an easy fallback can create further pressure if the transaction accelerates payment or changes the relief position," she continued.