Farmers: smoothing profits between years
Farm profits go up and down. Averaging spreads them evenly over 2 or 5 years, so a good year isn't taxed at a higher rate while a bad year wastes your tax-free allowance.
Your answer
Enter your farming profit for the latest year and the year before.
About this calculator
For farmers and market gardeners who work for themselves or in a partnership. Companies can't average their profits.
What happens to your answers
We don’t keep them. Your answers go to our server to do the sums and aren’t stored or logged. If you copy a link to your answers, they’re in the link itself, so only share it with people you trust.
How it’s worked out
You can average 2 years if one year's profit is less than 75% of the other's, or one year made no profit. You can average 5 years if the average of the first 4 years is less than 75% of the latest year's profit, or the other way round, or at least one (but not every) year made no profit. A loss counts as £0.
If you can, each year's profit becomes the average. We work out income tax and Class 4 National Insurance for every year, with and without averaging, on the 2026/27 rates. The difference is the saving. You claim on the latest year's tax return, up to 31 January almost 2 years after that tax year ends, and the whole difference is settled through that year's bill.
Worked example
Averaging your profits over 2 years would save you about £4,757 in income tax and National Insurance.
2-year claim · 2024/25 to 2025/26 · 2026/27 rates for every year · UK income tax rates
| Your farming profits over the 2 years (a loss counts as £0) | £100,000 |
|---|---|
| Averaged, each year gets half | £50,000 |
| The earlier year's profit is 25% of the latest year's: it must be under 75% | Can average |
| 2024/25 without averaging: income tax £1,486 and Class 4 National Insurance £446 on profit of £20,000 | £1,932 |
| 2025/26 without averaging: income tax £19,432 and Class 4 National Insurance £2,857 on profit of £80,000 | £22,289 |
| Tax and Class 4 without averaging | £24,220 |
| 2024/25 averaged: income tax £7,486 and Class 4 £2,246 on profit of £50,000 | £9,732 |
| 2025/26 averaged: income tax £7,486 and Class 4 £2,246 on profit of £50,000 | £9,732 |
| Tax and Class 4 with averaging | £19,464 |
| Averaging saves you | £4,757 |
Worked out using HMRC's published rates for the 2026/27 tax year (6 April 2026 to 5 April 2027), on a yearly basis.
Questions people ask
Should I choose 2 years or 5?
Whichever saves more. 5 years spreads one exceptional year more thinly, but it also brings in more years. Try both here, then talk to us: the real figures use each year's own tax rates.
Can I average a year that's already been averaged?
Yes. A year can be part of more than one claim, as long as you haven't already claimed for a later year.
Who can't claim?
Companies, anyone using the cash basis, and anyone in the year their farming business started or stopped. If you joined or left a farming partnership recently, check with us first.
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