Our dairy farm has been doing well; profits are over €120,000 this year and with efficiency improving, we expect another good year in 2026, even if milk price fluctuates.
Friends keep telling me to ‘go limited’ to save tax, but I’m unsure what that really means or whether it’s worth the hassle.
I know plenty of farmers who’ve stayed as sole traders for years without any issue, but I’m also conscious that our profits are climbing and tax bills are rising. What’s actually involved in setting up a company for the farm?
ANSWER: This is a great question and one that pops up time and time again. Turning your farm into a company – often called incorporating – can offer major tax advantages, but it isn’t automatically the right move for everyone.
Done well, it can reduce your annual tax bill, help fund future investment and support long-term succession planning. If done in haste, it can tie up cash or create future complications.
The tax gap: as a sole trader, your profits are taxed personally at up to 40 per cent income tax, plus USC and PRSI. Once profits pass €44,000 for a single person, the higher rate bites. A farming company, by contrast, pays 12.5 per cent corporation tax on trading profits left within the business. On €100,000 of profit, that’s a tax bill of €12,500 instead of around €35,000 as a sole trader – a serious saving if you can keep funds in the company to reinvest or repay loans.
However, it’s crucial to understand that the lower rate applies only to profits left in the company. Any money drawn out for personal use will be taxed in your own hands. If you need to take most of the money home each year to cover family living costs or loan repayments, incorporation may deliver little overall benefit.
The director’s-loan advantage: when you transfer your existing farm into a company, you’re effectively selling your business to the new entity, meaning you can create a director’s loan account. This represents the value of assets, including land, stock, machinery or cash, that you’ve put into the company.
If the total value transferred is €500,000, that becomes a loan balance due back to you from the company. You can draw that amount from the company tax-free over time, giving useful flexibility for cashflow or investment. However, to satisfy Revenue, the assets must be properly valued and documented by your accountant at the date of transfer.
This director’s loan is one of the most flexible and powerful features of incorporation when structured correctly.
Timings matter: incorporation works best when profits are consistently strong and likely to stay that way. One exceptional year alone isn’t enough reason to make the move. Ideally, you should have at least three years of solid profits – say €100,000 or more – and a clear plan to reinvest part of those profits each year.
If profits were to fall back or fluctuate sharply, the admin costs and compliance burden (accounts, CRO filings, audits) can outweigh any tax saving. Changing structure during a stable or rising period gives the company the best foundation for growth.
What about succession?
A limited company can also support succession planning. Shares can be transferred gradually to the next generation, easing the transition of control. But this must be planned carefully to preserve tax reliefs such as Retirement Relief and Business Relief.
A common mistake is transferring land into the company. In most cases, the land should remain in your personal name and be rented to the company. This avoids stamp duty and capital-gains complications and keeps future inheritance options open.
Compliance and cost: running a company brings extra duties such as separate accounts, tax returns, and stricter financial discipline. Professional fees rise, but you gain clearer financial reporting and separation between business and personal spending. Banks, insurers and grant agencies may also need updated details once the company is formed.
Ultimately, you’ll become both a director and employee of your own business, rather than self-employed.
With solid preparation, ‘going limited’ can help you manage tax efficiently, build reserves for investment, and make succession smoother. But timing and professional guidance are critical.
Marty Murphy, head of tax with ifac.
Marty Murphy is head of tax at ifac, the professional services firm for farming, food and agribusiness.
IN SHORT
Incorporation can be an excellent move for profitable farms that can retain some earnings annually. The 12.5 per cent rate only truly benefits you if profits remain in the company. Before proceeding, sit down with your accountant, and ideally your solicitor, to examine:
Average profits and cash needs. Assets to be transferred and their value. Family and succession plans.
Our dairy farm has been doing well; profits are over €120,000 this year and with efficiency improving, we expect another good year in 2026, even if milk price fluctuates.
Friends keep telling me to ‘go limited’ to save tax, but I’m unsure what that really means or whether it’s worth the hassle.
I know plenty of farmers who’ve stayed as sole traders for years without any issue, but I’m also conscious that our profits are climbing and tax bills are rising. What’s actually involved in setting up a company for the farm?
ANSWER: This is a great question and one that pops up time and time again. Turning your farm into a company – often called incorporating – can offer major tax advantages, but it isn’t automatically the right move for everyone.
Done well, it can reduce your annual tax bill, help fund future investment and support long-term succession planning. If done in haste, it can tie up cash or create future complications.
The tax gap: as a sole trader, your profits are taxed personally at up to 40 per cent income tax, plus USC and PRSI. Once profits pass €44,000 for a single person, the higher rate bites. A farming company, by contrast, pays 12.5 per cent corporation tax on trading profits left within the business. On €100,000 of profit, that’s a tax bill of €12,500 instead of around €35,000 as a sole trader – a serious saving if you can keep funds in the company to reinvest or repay loans.
However, it’s crucial to understand that the lower rate applies only to profits left in the company. Any money drawn out for personal use will be taxed in your own hands. If you need to take most of the money home each year to cover family living costs or loan repayments, incorporation may deliver little overall benefit.
The director’s-loan advantage: when you transfer your existing farm into a company, you’re effectively selling your business to the new entity, meaning you can create a director’s loan account. This represents the value of assets, including land, stock, machinery or cash, that you’ve put into the company.
If the total value transferred is €500,000, that becomes a loan balance due back to you from the company. You can draw that amount from the company tax-free over time, giving useful flexibility for cashflow or investment. However, to satisfy Revenue, the assets must be properly valued and documented by your accountant at the date of transfer.
This director’s loan is one of the most flexible and powerful features of incorporation when structured correctly.
Timings matter: incorporation works best when profits are consistently strong and likely to stay that way. One exceptional year alone isn’t enough reason to make the move. Ideally, you should have at least three years of solid profits – say €100,000 or more – and a clear plan to reinvest part of those profits each year.
If profits were to fall back or fluctuate sharply, the admin costs and compliance burden (accounts, CRO filings, audits) can outweigh any tax saving. Changing structure during a stable or rising period gives the company the best foundation for growth.
What about succession?
A limited company can also support succession planning. Shares can be transferred gradually to the next generation, easing the transition of control. But this must be planned carefully to preserve tax reliefs such as Retirement Relief and Business Relief.
A common mistake is transferring land into the company. In most cases, the land should remain in your personal name and be rented to the company. This avoids stamp duty and capital-gains complications and keeps future inheritance options open.
Compliance and cost: running a company brings extra duties such as separate accounts, tax returns, and stricter financial discipline. Professional fees rise, but you gain clearer financial reporting and separation between business and personal spending. Banks, insurers and grant agencies may also need updated details once the company is formed.
Ultimately, you’ll become both a director and employee of your own business, rather than self-employed.
With solid preparation, ‘going limited’ can help you manage tax efficiently, build reserves for investment, and make succession smoother. But timing and professional guidance are critical.
Marty Murphy, head of tax with ifac.
Marty Murphy is head of tax at ifac, the professional services firm for farming, food and agribusiness.
IN SHORT
Incorporation can be an excellent move for profitable farms that can retain some earnings annually. The 12.5 per cent rate only truly benefits you if profits remain in the company. Before proceeding, sit down with your accountant, and ideally your solicitor, to examine:
Average profits and cash needs. Assets to be transferred and their value. Family and succession plans. 
SHARING OPTIONS