Retiring From Farming: Sell, Let, Contract Farm, or Put Land Forward?

Many farming families reach this question at around the same time, because the people running England's farms are, on the whole, past the middle of their working lives. Defra's survey of the agricultural workforce at 1 June 2026, published on 24 September 2026, found that only 18.5% of principal farmers and holders were under 45. Its age bands put 29% of them between 55 and 64 and a further 36% at 65 or over, so close to two in three of the people running farms are 55 or older.

For a farmer with a son or daughter ready to take over, retirement is mostly a matter of handing over in stages. This guide is for the other case: the farmer with no one to take on the farm, or whose children have careers elsewhere, who still has to decide what happens to the land. The five routes are these:

• Keep farming in hand, with help. You stay the farmer and employ staff or hire contractors for particular jobs.
• Contract farming. A contractor does all the field work under a written agreement, while you remain the farmer in law and share in the result.
• Letting. A farm business tenancy, or FBT, hands the land to a tenant for a rent; a grazing licence does the same for part of a year.
• Selling. All or part of the land is sold, usually as farmland.
• Putting a field forward for development. The field on the edge of the village or town goes under an option agreement while the rest of the farm carries on under one of the routes above.

Most families end up with a mix. The sections below take each route in turn, then the tax points that link them, and finish with the facts worth gathering before anyone signs anything.

Two things the table cannot show matter just as much. One is the farmhouse: most retiring farmers want to stay in it, and every route except a sale of the whole farm allows that. The other is reversibility. A contract farming agreement or a short tenancy can be changed in a few years; a sale cannot be undone.

Yes, and for a farmer who wants to slow down rather than stop, it is often the first step. You remain the farmer. You employ a worker, or pay a contractor by the job for drilling, spraying or harvest, and you keep making the decisions and taking the profit or loss.

This route changes least for tax. Agricultural property relief, the inheritance tax relief on farmland, needs the land to have been occupied for farming for a minimum period. Section 117 of the Inheritance Tax Act 1984 sets two alternatives: the land must have been occupied by the owner for the purposes of agriculture for the two years before the transfer, or owned by them for seven years and farmed throughout that time by them or by someone else. A farmer who keeps farming in hand meets the first test year after year.

The weakness is that the work and the risk never really leave you. Paying contractors job by job means arranging each one, and the bills arrive whatever the harvest is worth. Many farmers find that after a few years the next step, a formal contract farming agreement, gives them the same tax position with far less to organise.

The words cover a wide range of arrangements, so what matters is how yours is built. HMRC's Inheritance Tax Manual calls contract farming a far looser term, applied to a variety of arrangements, and then describes the usual form, in which the landowner instructs the contractor to provide services to the landowner's own business.

Read that way, the agreement has these parts:

1. The business stays yours. In HMRC's words, the farming business on the land is the landowner's, the outputs from it are theirs and they account for the tax on it.
2. The contractor is paid a fee for the work. The manual says the fee usually reflects the labour and machinery that would ordinarily be used on the farm.
3. The contractor may share in the result. On top of the fee, the contractor may receive further sums based on how the farm enterprises perform, which gives them a reason to farm well.
4. The contractor has no tenancy. They come onto the land only as your licensee, to carry out the work, so the land comes back to you free when the agreement ends.
5. Decisions are made together and written down. How often you meet the contractor, and what those meetings cover, is one of the things HMRC weighs when it asks who was really farming, so the notes are worth keeping.

Because you are still the farmer, the farming risk is still yours. A wet harvest or a poor price shrinks your share, and in a bad year the contractor may be the only party paid in full. That is the price of keeping your farming status.

Who Is the Farmer for Inheritance Tax?

For inheritance tax, the manual says most contract farming agreements aim to keep the landowner as the only principal occupier of the land, with the contractor merely having access as a licensee to do the work, and that such an agreement is unlikely to affect agricultural relief on the farmland itself. It adds two warnings. A badly worded or badly run agreement can fail to achieve this, and the agreement may affect the relief on the farmhouse. Whether the farmhouse still qualifies is a question of fact and degree, judged on the financial risk the owner carried, their day-to-day involvement and their part in decisions about what to grow, when to sow and harvest, and when to sell.

A farm business tenancy hands the farming, and its risk, to a tenant in return for a rent. For a retiring farmer who wants a steady income and no part in the decisions, it is the simplest way to keep the land.

An FBT is the form of agricultural letting used since 1 September 1995, under the Agricultural Tenancies Act 1995. GOV.UK's guidance explains that a tenancy is an FBT if at least part of the tenanted land is farmed throughout the life of the tenancy. Either the two sides exchange notices before it begins, confirming it will remain an FBT throughout, which lets the tenant diversify if the agreement allows, or the tenant's business must be primarily agricultural.

• Length. You and the tenant agree the term. It can be a year or two, or ten years or more for a tenant who needs time to invest.
• Notice. GOV.UK gives the minimum notice period to quit an FBT as 12 months. How the notice rules work for fixed terms and break clauses is explained in our guide to tenancies and vacant possession.
• Rent reviews. Either landlord or tenant can demand a rent review every three years by law. The two sides can agree a different frequency, but the agreement must not rule out the rent going down.
• Improvements. A tenant who makes physical improvements with your consent, or leaves behind changes that add value, is entitled to compensation when they go. An upper limit can be agreed in writing, usually matching what the improvements cost the tenant.

The Tenancy Reform Industry Group Code

Retiring farmers who become landlords often find that the requests come later: a tenant wants to put up a building, sublet, diversify or join a government scheme. The Tenancy Reform Industry Group, known as TRIG, whose members advise Defra on agricultural tenancy law, published a code of good practice for projects requiring the landlord's consent in July 2021, signed up to by bodies including the CAAV, the CLA, the NFU and the Tenant Farmers Association. It asks the tenant to raise a proposal at the earliest practical opportunity, confirming in writing anything first put by word of mouth, with information proportionate to the proposal. The landlord replies in writing, approving, approving with conditions or refusing, and gives reasons for a refusal.

A Grazing Licence Instead

Where the land is grass and the farmer is not ready to commit it for years, a grazing or mowing licence lets a neighbour use it for part of a year. It gives less income than a tenancy and asks more of you, because the land comes back between seasons, but it keeps every other route open. A licence has to be set up and run as a genuine licence, or it can turn into a tenancy; our tenancies guide explains where that line falls.

For tax, letting moves you from farmer to landlord. That shift is the subject of the next section.

Agricultural Property Relief Usually Survives a Letting

Agricultural property relief, or APR, reduces inheritance tax on the farming value of land. It survives most lettings made by a retiring farmer. Section 116 of the Inheritance Tax Act 1984 allows the full rate where the owner has vacant possession or can get it within 12 months, or where the property is let on a tenancy beginning on or after 1 September 1995, which covers every farm business tenancy. Section 117 then asks for seven years' ownership with the land farmed throughout by the owner or someone else, a test a farmer who has owned the land for decades usually meets on the day the tenancy starts.

Business Property Relief Is the One at Risk

Business property relief, or BPR, can cover value that APR does not reach, such as the hope value of a field near a village, but only where the land is part of a trading business. Section 105(3) of the 1984 Act excludes a business that consists wholly or mainly of dealing in land or making or holding investments. Once a farmer has stopped trading and simply collects rent, what remains is mainly the holding of let land, which is the kind of business that exclusion describes. HMRC's own manual points the same way. On lettings of land it cites McCall v Revenue and Customs Commissioners, where grassland let for grazing was held to be a business wholly or mainly of holding investments, because its real value lay in the grazing rather than in any services provided, and the graziers' lack of exclusive occupation did not change that. So a farmer who stops trading and lets the land usually keeps APR on its farming value but loses the BPR that may have covered anything above it. A farmer who keeps trading, in hand or through a genuine contract farming agreement, is in a stronger position to keep both.

The 2026 Allowance

Both reliefs changed from 6 April 2026. HMRC's policy paper sets a £2.5 million allowance for the combined value of property qualifying for 100% agricultural and business relief, with relief at 50% on qualifying property above it. Any unused allowance can be transferred to a surviving spouse or civil partner, and the paper notes that, with the nil-rate bands, a couple could pass on up to £5.65 million free of inheritance tax between them. The option to pay the tax on qualifying property in equal yearly instalments over ten years, interest-free, was extended.

• In hand or contract farmed: APR on the farming value, and BPR possible on any higher value, within the shared allowance.
• Let on an FBT: APR on the farming value continues; BPR on any higher value is usually lost.
• Sold: neither relief applies to the cash afterwards.
• Put forward under an option: the land is still yours and still farmed or let until completion, so its relief follows whichever of the routes above applies to it until then.

How a signed option and its exercise interact with these reliefs is a point for your own adviser, and our guide to tax when selling land for development sets out how the reliefs apply to land with development value.

Selling suits a farmer who wants a clear break, a lump sum for retirement, or to settle money on the family now rather than land later. It ends the farming responsibilities and turns an asset that earns a small return into one that can be invested elsewhere. It is also final, and the land's future, including any prospect of planning, goes with it.

The tax on a sale is capital gains tax on the gain, and three reliefs come up most often for retiring farmers:

• Business Asset Disposal Relief. A farmer who stops trading can still claim it on land used in the business if the assets are sold within three years of closing the business, and GOV.UK gives the rate as 18% on qualifying gains from 6 April 2026. The conditions are set out in our guide to Business Asset Disposal Relief on farmland.
• Rollover relief. A farmer who sells land but buys more for the business, which some do as a step towards retirement by moving to a smaller holding, can defer the gain; our guide to rollover relief on a land sale explains the time limits.
• Inheritance tax afterwards. Cash does not qualify for agricultural or business relief, so the proceeds may be taxed more heavily on death than the land would have been. That is often the deciding point for a farmer near the end of life rather than at the start of retirement.

Selling part rather than all is common. A block of land that a neighbour wants can be sold, and the money used to clear borrowing or fund retirement, while the farmhouse and the land around it are kept and let or contract farmed. The three-year window for Business Asset Disposal Relief after the business closes is one reason to plan the order of these steps with an accountant before the last harvest, not after it.

Yes. On most farms any development potential sits in one or two fields that touch a village or town, next to roads and existing homes. Those fields can go forward under an option agreement while the rest of the holding is let, contract farmed or farmed in hand exactly as planned for retirement.

Under our option agreement, the price for the field is agreed with you at the start, written into the agreement as a figure, and set above what the land is worth today in its current use. We pay for and run all the planning work, at our own cost and risk. If planning permission is secured, we complete the purchase and you receive the agreed price on completion. If it is not, you keep the land and owe nothing.

The two arrangements sit together comfortably, because nothing about the farm changes when the option is signed:

1. A free desktop review of the edge field. We look at the title plan, the constraints, the access and the council's position, and tell you plainly whether the field has a realistic case.
2. Heads of terms. If it does, we set out the price, any option fee, the land included and how your legal and agent fees are covered. We contribute to the fees of your own solicitor and land agent, so it costs you nothing to get it done properly.
3. Signing. Signing does not transfer the land. You remain the owner and keep using it exactly as before, whether that is farming, grazing or letting.
4. The planning period. We commission the surveys and run the application or the local plan route. The rest of the farm carries on under its own arrangements, and our agreement continues while any application or appeal is being decided.
5. Completion. Once permission is secured, we complete the purchase and the agreed price is paid, with the milestones set out in the agreement. Vacant possession of that field is given on the completion date, not before.

If you have agreed to keep farming or letting the field in the meantime, that continues until completion, and the agreement sets out the gap between exercise and completion so that you can plan the final harvest or the end of a grazing licence. Where a tenant or grazier already uses the field, how and when it is brought back is covered in our guide to tenancies and vacant possession, so a new FBT on the rest of the farm is best drawn to leave the edge field out, or to let it be taken back.

For a retiring farmer, the attraction is that one field can provide a capital sum on completion without the rest of the farm being sold or the farming routine being disturbed. How the price itself is reached is explained in our guide to how the price for your land is worked out.

Not one that is open to new applicants. The Lump Sum Exit Scheme, England's one-off payment for farmers leaving the industry, opened on 12 April 2022 and closed to applications on 30 September 2022. It was set up by the Agriculture (Lump Sum Payment) (England) Regulations 2022, made on 25 March 2022, which let the Secretary of State pay a lump sum in place of the Basic Payment Scheme and delinked payments the farmer would otherwise have received.

The regulations set the terms. The lump sum was based on the farmer's average Basic Payment Scheme payments for 2019 to 2021, with that average capped at £42,500 and then multiplied by 2.35, so the most anyone could receive was £99,875. In return, the farmer had to transfer the agricultural land at their disposal on 17 May 2021, apart from five hectares, to someone who was not a connected person, and surrender all their payment entitlements, with 31 May 2024 set as the deadline for both. The money was a single payment, due no later than six months after the farmer was told they had met the requirements.

Delinked Payments Are Ending

Farmers who did not take the lump sum have received delinked payments, the replacement for the Basic Payment Scheme, which since 2024 have been paid without any need to hold land or entitlements. GOV.UK's guidance on delinked payments, updated on 1 July 2026, states that 2027 will be the last year of them, and that anyone paid under the Lump Sum Exit Scheme is not eligible. The reductions are steep: for 2026 and 2027 the first £30,000 of a farmer's reference amount is reduced by 98%, and anything above that by 100%, so a £40,000 reference amount produces £600. The same guidance says a reference amount is not affected if you transfer out some or all of your land after 16 May 2022, so letting or selling land in retirement does not cut the last of these payments.

For retirement planning, the lesson is that the old support payments no longer carry an income on their own. Whatever the land earns in retirement now has to come from the land itself: a rent, a share of a contract farming surplus, the return on money from a sale, or a price paid for a field.

Most of the decision rests on facts only you hold. Gathering them first makes every conversation, with the family, the accountant, an agent or us, shorter and more useful.

• The HM Land Registry title number and plan for each parcel, noting which fields were bought at different times and are on separate titles.
• Who farms each field today and on what terms: in hand, a contractor by the job, a written agreement, a tenancy or a grazing licence, with copies of any paperwork and the date each began.
• How long you have owned and farmed each parcel, since the inheritance tax tests count years of ownership and occupation.
• Whether you trade as a sole trader, a partnership or a company, and who the partners or shareholders are, because that decides who can claim each relief.
• Any environmental or stewardship agreement on the land, with its end date, because a tenant or contractor will need to know what they are taking on.
• Where the farmhouse and any cottages sit, who lives in them and how they are reached, since most retiring farmers keep the house whatever happens to the land.
• Which field, if any, adjoins a village or town, and how it is reached from the public road.
• What the family wants: a regular income, a lump sum, to keep the land for the next generation, or a mix of all three.

With those facts on one sheet of paper, the routes in the comparison table usually narrow to one or two quickly. If one of your fields sits on the edge of a settlement, a free desktop review of your land will tell you whether it has a realistic case before you settle the plans for the rest.