British farmers are increasingly turning to diversification strategies such as glamping sites and holiday lets in response to proposed changes to inheritance tax (IHT) rules, which are scheduled to take effect in 2026.
These changes will cap Agricultural Property Relief at £1 million per estate, with any value exceeding that threshold subject to a 20% tax.
The reform represents a significant shift from the current policy, under which farmland and associated buildings may qualify for 100% IHT relief.
This policy adjustment has prompted concern across the agricultural sector, particularly among small and family-run farms that rely heavily on full IHT relief to preserve generational assets.
Some landowners are now pursuing alternative income streams, including hosting visitors on their land, converting barns into holiday rentals, and establishing on-site retail operations.
Richard Watts, a farmer at Moor Farm in Gloucestershire, operates a Feather Down Farms glamping site and says that while the venture has helped supplement his income, it does not sufficiently offset rising operational pressures.
“At Moor Farm, diversification through our Feather Down Farms glamping site has provided vital income, but more support from the Government is necessary for the industry to grow,” Watts said.
He added that recent fiscal policies have failed to address the broader financial strain on farms.
Legal professionals are also raising concerns about the unintended consequences of diversification.
Andrew Wilkinson, Head of Trusts and Estates Disputes at law firm Shakespeare Martineau, explained that certain diversification efforts could alter how land is classified for tax purposes.
“It is important for farmers to keep in mind that introducing new income streams or changing how their land is used could unintentionally shift the land’s classification from agricultural to commercial,” Wilkinson said in a report by Express.
“If the land is no longer being used for agricultural purposes, the estate may no longer qualify for Agricultural Property Relief, which could significantly increase the inheritance tax amount.”
Wilkinson noted that while diversification is a reasonable response, farmers must navigate it carefully to avoid jeopardizing existing tax protections.
“Farming families are right to explore new income streams. This includes rental income from holiday lets, farm shops, event venues, or other side businesses,” he said.
Watts expressed concern that the combination of tax reform, rising wages, National Insurance contributions, and energy costs is putting “immense pressure” on farming families.
“Last year’s Budget and the recent Spring Statement have failed to address the urgent challenges facing farmers,” he said.
He also called on the Labour Party to take concrete action by implementing targeted financial support, modernising outdated tax policies, and adopting the National Farmers’ Union (NFU)’s proposal for a dedicated agricultural budget.
“The Government must prioritise targeted support, reform outdated tax policies, and commit to the NFU’s call for a dedicated agricultural budget to safeguard the future of British farming,” he said.
For professionals in the outdoor hospitality industry, particularly those operating glamping or farm stay accommodations, these developments highlight both a growing opportunity and a cautionary tale.
As more farmers seek to diversify into tourism-based ventures, existing operators may find new demand and partnership opportunities, but must also be mindful of how changes in land use could affect long-term sustainability and regulatory compliance.