Why does a record year create a cash problem rather than solve one?

Because tax on farm profits is paid roughly nine to twenty-one months after the profit is earned, and the payment on account system compounds it. Profit made in the year to 5 April 2026 is due by 31 January 2027, and that same day carries the first payment on account for 2026/27 at half the previous year's liability — calculated on the record year, not on what you are actually earning now. On the illustrative Co Tyrone figures in this article, the January 2027 demand is £17,561.10 against a liability of £14,728.60, with another £7,364.30 following in July. The money is due when prices have already turned.

What is the cash basis and why does it matter to a farm?

The cash basis records income when money arrives and expenses when they are paid, ignoring stock, debtors and creditors. Since 6 April 2024 it has been the default for sole traders and partnerships — you must elect to use the accruals basis instead. For a small service business that is a simplification worth having. For a farm it is expensive, because HMRC's helpsheet HS224 states plainly that you cannot claim averaging if you used the cash basis. A farm carrying livestock, growing crops and holding feed and fertiliser also gets a distorted profit figure. Check which basis your last return used before the next one is filed.

How much of the £1bn came from subsidy?

Just under 30%, and that is low by historical standards. DAERA's estimate puts 2025 direct payments — the Basic Payment Scheme, Young Farmers', Beef Carbon Reduction and Suckler Cow Scheme payments — at £303 million, which is 1% down on 2024. In lean years the majority of the sector's profit, and sometimes the entirety of it, has been accounted for by public support. This year the market did the work: cattle output alone rose 37% to £898 million on a 32% rise in the finished clean cattle price. That makes the 2025 result better quality than the headline number alone suggests.

Should I reduce my payments on account if 2026 is going badly?

Possibly, but only on a calculated forecast. You can apply to reduce payments on account through HMRC when you expect the coming year's liability to be lower, and after a spike year that is often genuinely the case. The risk is one-directional: if you reduce the payments below what turns out to be due, HMRC charges interest on the shortfall from the original due dates. So the sensible sequence is to prepare a realistic profit projection for the year to April 2027 first, calculate the tax on it, and reduce to that figure — rather than reducing to whatever the bank balance can stand and dealing with the consequence later.

Northern Ireland farm profits passed £1bn. The bill for that lands on 31 January.

Q: Can I claim farmers' averaging if I farm in Northern Ireland?

Yes. Averaging is a UK-wide income tax relief and it applies in Northern Ireland on exactly the same terms as in England and Wales, using the same rates and bands — unlike Scotland, which sets its own income tax rates. You can average over two years or five. The two-year test is that the difference between the two years' profits must be more than 25% of the profits of the better year; below that, no claim is possible. Sole traders claim in box 72 of the full self-employment pages and partners in box 11 of the partnership pages. In a partnership each partner decides independently, so one partner claiming does not oblige the others to.

Reacting to: Northern Ireland farm profits topped £1bn in 2025 (BBC News NI, 20 August 2026) →

The Department of Agriculture, Environment and Rural Affairs published its first estimate of 2025 farm incomes this morning, and the headline is genuinely good news. Total Income from Farming in Northern Ireland rose from £736 million in 2024 to £1.03 billion in 2025 — up 40.5% in cash terms and 36% in real terms, over a billion pounds for the first time. Total output was 12% higher at £3.62 billion, while the cost of inputs rose only 2%, to £2.18 billion. When output moves six times faster than costs, the gap falls straight through to profit.

Here is the part that will not be in the coverage. A spike year is a tax event. Profit earned in the year to April 2026 is assessed on the 2025 to 2026 tax return, which is due by 31 January 2027 — and the same day carries a payment on account for the year after, calculated on the good year rather than the one you are actually trading through. Agriculture Minister Andrew Muir already said the quiet part out loud in the release: “I recognise that market prices have fallen considerably in 2026 while input costs have risen with an uncertain outlook for the period ahead.” So the tax on the best year in a generation falls due in the middle of a worse one. That timing mismatch is the whole story for a farm business, and there are three reliefs that deal with it.

What actually drove the £1bn

It was not a good year for farming. It was a very good year for beef, dairy and eggs, and a poor one for several other sectors, averaged into one number. Cattle output rose 37% to £898 million, with the average producer price for finished clean cattle at £6.33/kg and cull animals at £4.88/kg — 32% and 54% above their 2024 averages. That happened on less beef: the number of animals slaughtered fell 4.4% and the volume of meat produced was 3.6% lower. Farmers have been leaving beef after years of thin margins, supply tightened, demand held, and price did the rest.

Dairy stayed the largest single contributor at £1.2 billion, up 11%, on a milk price of 42.5p a litre and an 8% rise in volume to 2.8 billion litres. Eggs rose 17% to £317 million. Against that: poultry fell 13% to £304 million, sheep fell 6% to £120 million, pigs fell 1% to £294 million, potatoes fell 16% to £28 million, and horticulture came in lower at £85 million. If you are on a sheep or potato enterprise in Co Down reading that farming made a billion pounds, you are not imagining the disconnect.

Two input lines deserve a note. Feed, at 55% of all input costs, was essentially flat at £1.19 billion — 6% more tonnage bought at a 6% lower price. Fertiliser went the other way, up 33%, on 20% more volume at a 10% higher price per tonne, taking fertiliser and lime together to £133 million. And just under 30% of the sector's profit came from public subsidy, on direct payments of £303 million that were 1% down on 2024. That last figure is the healthiest thing in the release: in lean years subsidy has accounted for most or all of the sector's profit, and this year the market did the work.

The number that reaches your own kitchen table

Sector totals do not pay tax. Farm Business Income does, and DAERA forecasts it rising 19% across all farm types, from an average £56,390 in 2024/25 to £66,840 in 2025/26.

Take an illustrative example — a Co Tyrone suckler-to-finishing farm, sole trader, accounts prepared on the accruals basis, no other income. Profit of £30,000 in 2024/25 and £62,000 in 2025/26, which is roughly what a 37% lift in cattle output does to a beef-weighted business. Northern Ireland uses the UK rates and bands, not the Scottish ones, so the personal allowance is £12,570 and higher rate starts at £50,270.

On £62,000: income tax of £12,232 (£37,700 at 20%, then £11,730 at 40%) plus Class 4 National Insurance of £2,496.60 (6% to the higher-rate threshold, 2% above). Total liability £14,728.60. The payments on account already made during the year were set off the £30,000 year — two instalments of £2,265.90, £4,531.80 in total. So on 31 January 2027 the farm owes a balancing payment of £10,196.80, plus a first payment on account for 2026/27 of £7,364.30. £17,561.10, on one day, followed by another £7,364.30 on 31 July. Just under £25,000 inside twelve months, on a farm whose 2026 cattle price is below where it was.

Farmers' averaging is what this relief exists for

Averaging lets a farmer smooth profits across two years or five, and the test is a volatility test. For a two-year claim, the difference between the two years' profits must be more than 25% of the better year. Our example: a £32,000 gap against £15,500, so it qualifies comfortably.

Averaged, both years become £46,000. That is below the higher-rate threshold, so 2025/26 tax falls to £8,691.80. The earlier year is restated upward, and HMRC collects that adjustment — £4,160 — in the 2025/26 calculation rather than reopening 2024/25. So the liability becomes £12,851.80, the balancing payment drops to £8,320, and the payment on account for 2026/27 drops to £6,425.90. £14,745.90 due on 31 January instead of £17,561.10 — £2,815.20 less cash in the worst week of the year, and £1,876.80 less tax across the two years, because the claim keeps the farm out of the 40% band.

Averaging is not free money. It is a smoothing device, and it can work against you if the following year is better again. In a partnership — which is how most family farms here are structured — each partner decides separately, so a father can claim and a son need not.

The cash basis quietly locks you out of it

This is the trap, and it is new enough that plenty of 2024/25 returns have already walked into it. Since 6 April 2024 the cash basis is the default for sole traders and partnerships; you now have to elect out to prepare accounts on the accruals basis. And HMRC's own helpsheet is one line long on the point: you cannot claim averaging if you have used the cash basis to calculate your profits.

For most small trades the cash basis is a simplification worth having. For a farm holding livestock, growing crops and carrying feed and fertiliser stocks, it removes the single most valuable relief in the farming tax code — and it does it silently, because nothing on the return tells you what you gave up. Anyone who has just had a record year needs to know which basis their accounts are on before the 2025/26 return is filed, not after.

Do these three things this week

One: find out which basis your last return used. It is a tick box on the self-employment pages. If it says cash basis, that decision needs revisiting before the 2025/26 return goes anywhere near HMRC. The rules are set out in HMRC's helpsheet HS224.

Two: get a profit figure for the year ended 5 April 2026 now. Not in January. The whole point of knowing in August is that averaging, the accruals election and a savings plan are all still open to you; by the last week of January the only thing left is the payment. Our guide to farm accounts in Northern Ireland covers what the year-end pack needs to contain.

Three: if 2026 trading is down, price up the reduction to your payments on account before the 31 July instalment, using HMRC's payments on account route. Reduce it on a forecast, though, not a feeling — HMRC charges interest on any reduction that turns out to have been too generous. That is a cashflow and budgeting exercise, and it takes an afternoon.

What is still uncertain, and when we will know

The £1.03 billion is a first provisional estimate. DAERA has already revised earlier years in this release, and 2025 will be revised too, most likely by a few percent in either direction rather than a rewrite. The £66,840 Farm Business Income figure is a forecast, not an outturn, and DAERA flags exactly why it may not hold: the Farm Business Survey accounting year ends around mid-February, and milk prices in January and February 2026 were substantially lower than the same months of 2025. Dairy farms in particular could land under the forecast. The confirmed figures come from the Farm Business Survey in DAERA's Farm incomes in Northern Ireland series.

The 2026 picture is the one nobody can price yet. The Minister has confirmed the direction — prices down, inputs up — but the size of the fall is a 2027 statistic. What that means practically is that the 2025/26 return should be prepared on the assumption that the following year is worse, which is precisely the assumption averaging and reduced payments on account are built for.

One more date, because it lands on the same businesses: Making Tax Digital for Income Tax began on 6 April 2026 for sole traders and landlords with qualifying income over £50,000 in 2024/25, and the threshold drops to £30,000 of 2025/26 income from 6 April 2027. Qualifying income is turnover, not profit, so a great many NI farms are already inside it. If yours is, quarterly updates are running now — our Making Tax Digital page sets out what that means in practice, and the tax service covers the return itself.

A billion-pound year is worth marking. It is also the year that costs the most to get wrong, and the difference between the two outcomes is decided in August, not January. If you farm in Northern Ireland and nobody has raised averaging with you yet, our Ballymena office is twenty minutes from most of Mid Antrim.