Every new activity on the farm can be taxed differently from the farming itself. Here is how income tax, VAT, business rates and capital gains treat the common side lines, as of October 2026.
Each side line is taxed on its own facts. Rent from converted buildings is usually property income, while contracting, a farm shop or serviced holiday lets point towards trading income; GOV.UK sets the Self Assessment reporting limits for rental income. For VAT, letting land is normally exempt but holiday accommodation is standard-rated, and taxable side lines count towards the £90,000 registration threshold. The furnished holiday let regime ended on 6 April 2025. Keep every activity in separate farm books and ask your accountant.
Several things, and they do not all move together. HMRC's manual says all farming carried on by the same person is treated as one trade. That rule covers farming. A holiday let, a farm shop, a solar array or a contracting round has to be looked at on its own facts, and the same person can end up with farming profits, property income and a separate trade on one return.
There are five places to look: income tax on the profits, VAT, business rates, planning permission, and capital gains if you later sell or convert. A change in one can undo the logic in another. A barn let to a tenant may be exempt for VAT and sit comfortably as property income, while the same barn let as holiday accommodation is standard-rated for VAT and rated differently for business rates.
This guide covers what I could confirm on official sources for England and the UK-wide tax rules. Rates, planning and registration rules differ in Scotland, Wales and Northern Ireland, and I have not covered them. Nothing here is tax advice. Your accountant should look at the actual arrangements before you sign anything.
Letting a building or land normally produces property income. GOV.UK says to report rental income on a Self Assessment return if it is over £2,500 after allowable expenses or over £10,000 before them, and to contact HMRC if it is over £1,000 and up to £2,500. If you do not usually file, register by 5 October after the tax year. Repairs are allowable and improvements are not.
Running an activity, as opposed to letting space, tends to point towards trading. I did not find a GOV.UK page that draws that line for farms, so this is the question to put to your accountant. There are £1,000 trading and property allowances for small amounts, but you take the allowance instead of claiming expenses, and the trading allowance does not apply to partnership trading income.
Solar and similar tariffs depend on capacity. The HMRC manual says that where generation and export tariffs are received in a business capacity they are business receipts on normal principles.
Total qualifying income from self-employment and property feeds Making Tax Digital. See our guide to the Making Tax Digital thresholds.
It ended. GOV.UK confirms the Furnished Holiday Let regime was abolished on 6 April 2025, and from the 2025 to 2026 tax year short-term holiday and self-catering income is taxed under the usual residential landlord rules. The old reliefs no longer apply.
HMRC's capital gains manual says rollover relief is not available where the replacement asset is acquired on or after 6 April 2025 for holiday letting, and Business Asset Disposal Relief is not available on a disposal of a holiday let business on or after that date. If you read an older article that promises these reliefs, treat it as out of date.
The practical effect is that a holiday let on the farm is no longer treated like a trade for these reliefs. Check with your accountant how your existing lets are now reported, and whether furniture and fittings still earn any allowance.
There is one more change coming. GOV.UK says a mandatory short-term let registration scheme in England is expected to begin in March 2027. Ask your council how registration will work locally.
Start with the rule that catches farms out: taxable turnover is everything you sell that is not exempt or outside the scope, and that includes zero-rated cattle. HMRC's registration notice excludes exempt supplies, and lists letting of land and buildings as exempt but not hotel or holiday accommodation. Notice 742 says holiday accommodation is standard-rated, and exempt lettings can be made taxable by opting to tax.
So rent from a let barn does not count towards the £90,000 registration threshold (current as of October 2026), but holiday lets, contracting, farm visits and riding lessons do. Food sold in a farm shop is mostly zero-rated, and hot food is always standard-rated. Our guide on the farm VAT registration threshold covers the rolling test.
If you are on the Agricultural Flat Rate Scheme, the notice says you can stay in it while non-farming taxable turnover is below the registration threshold, but you cannot charge VAT or the flat rate addition on those supplies unless you are VAT registered. You must leave if non-farming supplies take you over the threshold. Our flat rate scheme guide explains the exit rules.
Farmland and farm buildings are generally exempt. GOV.UK says you may not pay business rates on agricultural land and buildings used for agricultural purposes, and that if a change means the property is no longer exempt you usually pay the new rate from the day the change happened. A shop on agricultural property may qualify for rural rate relief, but only where it is the only business in a rural area.
Self-catering has its own test in England. The property must be available to let commercially for at least 140 nights in a 12-month period, with the intention of doing so again in the next 12 months, and actually let for at least 70 nights. Stays longer than 28 nights do not count towards the 70.
For planning, the local planning authority decides whether you need permission for short-term letting. I could not verify wider permitted development rules for converting buildings, so ask the council before you spend money on a conversion. Tell your council when a building changes use, because the rates position can change from that day.
On a sale, Business Asset Disposal Relief is charged at 18% on qualifying gains from 6 April 2026 (14% from 6 April 2025 to 5 April 2026, 10% before). It needs you to be a sole trader or business partner and to have owned the business for at least two years. As above, it does not apply to a holiday let business disposed of on or after 6 April 2025.
Solar panels are one of the few things with a specific rule: all capital expenditure on solar panels is designated special rate for capital allowances, so ask your accountant how that affects your claim. Our guide to farm expenses, red diesel and capital allowances covers how allowances work.
Converting a building is capital expenditure rather than a repair, so do not push it through the repairs line. Diversification can also affect inheritance tax relief on the farm, because business relief does not cover a business mainly holding land or buildings. See our guide to inheritance tax on farms and take advice before you restructure.
Give every activity its own income and cost headings from the first day, and ideally its own bank account. The reasons are practical. VAT depends on which sales are taxable, exempt or zero-rated, input VAT on shared costs has to be split sensibly, and the tax return needs farming, property and trading figures apart.
Record private use at the time, such as a cottage the family used for a fortnight. Keep invoices and tenancy or booking records for each activity, and keep the farm accounts clean of the side line so that a loss on one does not hide in the other. HMRC's record rules are in our guide to what HMRC expects you to keep.
FarmHQ, the farm office app for UK cattle and sheep farms (in beta), keeps receipts and invoices with the farm records, and Ask Farmer Joe drafts while you confirm. It does not replace your accountant. See FarmHQ pricing.
Yes. Rent from letting a building is normally property income, taxed through Self Assessment once it passes the reporting limits. GOV.UK says to report it if over £2,500 after allowable expenses or over £10,000 before expenses. Repairs are allowable, improvements are not. Ask your accountant how to treat a conversion.
Yes. Holiday accommodation is standard-rated, so its value counts as taxable turnover alongside your zero-rated farm sales. The threshold is £90,000 as of October 2026. Exempt rent from letting land or buildings does not count, unless you have opted to tax. Check the current figure on GOV.UK.
Only while non-farming taxable turnover stays below the VAT registration threshold. HMRC's notice says you cannot charge VAT or the flat rate addition on those lettings unless registered, and you must leave the scheme if non-farming supplies take you over the threshold. Take advice before you start.
In England a self-catering property rated as a business may pay business rates instead of council tax. The test is that it is available to let for at least 140 nights and actually let for at least 70 nights in a 12-month period. You apply to the Valuation Officer, so keep your booking records.