With BPS gone and prices as unpredictable as the weather, many Yorkshire farms are looking for income that doesn’t depend on the mart or the merchant. Holiday lets and glamping, farm shops and cafés, contracting, livery, storage, events and renewable energy can all work well. But each has its own cash shape, and the first two years are where most of the risk sits.
The cash shape of a new venture
- Up-front costs: planning applications, building or conversion, fit-out, equipment, website and marketing, all before the first customer.
- A slow start: bookings, footfall and contracts take time to build. Forecast a cautious first year, not a full one.
- Seasonality: a holiday let can be full in August and empty in January. A farm shop has a Christmas peak. Plot it month by month.
- Working capital: a shop needs stock on the shelves before it sells anything.
- Running costs: cleaning, changeovers, insurance, business rates, utilities, booking fees and staff time, including yours.
VAT and tax: check before you build
- VAT: farm produce is mostly zero-rated, but holiday accommodation, café food and many services are standard-rated at 20%. If the farm is already VAT registered, the new income is usually inside the same registration, so 20% of it goes to HMRC. If you’re not registered, the new income counts towards the registration threshold (currently £90,000 of taxable turnover).
- Holiday lets: the special tax treatment for furnished holiday lets ended in April 2025, so check with your accountant how the income will be taxed.
- Inheritance tax: land or buildings moved out of farming use may not qualify for agricultural property relief. See our guide to the APR and BPR changes, and take advice.
How to test the plan
- Forecast it as its own enterprise, then add it to the farm forecast to see the combined picture.
- Work out the break-even: how many nights, customers or hours a month cover the running costs and any finance.
- Run a pessimistic case: lower occupancy or sales, a slower start and higher costs. If the farm can live with that, the plan is robust.
- Look three years ahead, including when any borrowing is repaid and when the project starts adding cash rather than using it.
- Count your own time. Every hour on changeovers or the shop counter is an hour not spent on the farm.
The best diversification projects are tested on paper first. It’s much cheaper to change a forecast than a building.
If you’re weighing up a diversification project, I can build it into your farm forecast with best and worst cases, so you and the bank can see what it means before you commit. Start with a free cash health review.
An accountant of ten years who has built more cashflow forecasts than hot dinners. I help farms and agricultural businesses across Yorkshire see what’s coming and plan for it. More about me.