Agricultural Property Relief

Inheritance Tax for
Farmers & Rural Landowners

The 2024 Budget introduced a £1 million cap on Agricultural Property Relief and Business Property Relief from April 2026 — a major change that could expose many farming families to significant IHT bills. PDA Law helps farmers and rural landowners plan ahead.

Speak to an Estate Planning Solicitor01244 757 352

2024 Budget Change: From April 2026, the combined APR and BPR 100% relief is capped at £1 million per person. Assets above this threshold will only attract 50% relief (effective IHT rate of 20%). Review your estate plan now.

Agricultural Property Relief (APR) Explained

Agricultural Property Relief (APR) is an inheritance tax relief that can reduce the value of qualifying agricultural property by 100% or 50% for IHT purposes. It has historically allowed farming families to pass on their farms to the next generation without a large IHT bill.

APR applies to agricultural land, farmhouses, farm cottages, and farm buildings used for agricultural purposes. The property must be situated in the UK, Channel Islands, or Isle of Man, and must have been owned and occupied for agricultural purposes for the required period.

The 2024 Budget Changes

The October 2024 Budget announced that from April 2026, the combined value of APR and Business Property Relief (BPR) qualifying assets that can attract 100% relief will be capped at £1 million per person. Assets above this threshold will only attract 50% relief, resulting in an effective IHT rate of 20%.

Example: Farm Worth £3 Million

Farm value£3,000,000
APR/BPR 100% relief cap£1,000,000
Remaining value (50% relief)£2,000,000
Taxable value (50% of £2m)£1,000,000
Potential IHT bill (40%)£400,000

* Simplified example. Actual liability depends on nil rate band, spousal exemption, and other factors. Seek professional advice.

Planning Strategies for Farmers

1
Review your will
Ensure your will maximises use of nil rate bands, spousal exemption, and available reliefs. Consider whether assets should pass directly or via trust.
2
Consider lifetime gifts
Gifts of agricultural property made more than 7 years before death are potentially exempt from IHT. Careful planning of lifetime gifts can significantly reduce your estate.
3
Review farm ownership structure
The ownership structure of the farm (sole trader, partnership, company) affects the availability of APR and BPR. A review may identify opportunities to maximise reliefs.
4
Ensure APR and BPR conditions are met
Confirm that your farm meets the conditions for APR and BPR. Common pitfalls include diversification activities that may not qualify, and let land that has not been owned for 7 years.
5
Consider trusts
Trusts can be used to pass assets to the next generation while retaining some control. Agricultural property can be placed in trust, subject to the relevant conditions.

Speak to a Farming Estates Solicitor

Get clear advice on how the 2024 Budget changes affect your farm and what you can do now to protect your family's inheritance.

Make an Enquiry01244 757 352

Related Services

Frequently Asked Questions

What is Agricultural Property Relief (APR)?
Agricultural Property Relief (APR) is an inheritance tax relief that reduces the value of agricultural property for IHT purposes. It can provide relief of either 100% or 50% of the agricultural value of qualifying property. APR applies to agricultural land, farmhouses, farm cottages, and farm buildings used for agricultural purposes.
What changes were made to APR in the 2024 Budget?
The October 2024 Budget announced significant changes to APR and Business Property Relief (BPR). From April 2026, the combined value of APR and BPR qualifying assets that can attract 100% relief will be capped at £1 million per person. Assets above this threshold will only attract 50% relief (an effective IHT rate of 20%). This is a major change for farmers with large landholdings.
What qualifies for Agricultural Property Relief?
To qualify for APR, the property must be agricultural property situated in the UK, Channel Islands, or Isle of Man. It must have been owned and occupied for agricultural purposes for at least 2 years (if occupied by the owner) or 7 years (if let to a tenant). The relief applies to the agricultural value — if the property has development value, that element does not qualify for APR.
Can I use both APR and Business Property Relief?
Yes — APR and BPR can both apply to a farming business. BPR can apply to the business element of a farming operation (such as farm machinery, livestock, and trading activities) while APR applies to the agricultural land and buildings. From April 2026, the combined £1 million cap applies to both reliefs together.
What is the £1 million cap introduced in the 2024 Budget?
From April 2026, the combined value of APR and BPR qualifying assets that can attract 100% relief is capped at £1 million per person. Assets above this threshold will attract 50% relief rather than 100%, resulting in an effective IHT rate of 20% on the excess. For a farm worth £3 million, this could mean an IHT bill of £400,000 (20% of £2 million above the cap).
What planning can farmers do to reduce their IHT liability?
There are several strategies to consider: making lifetime gifts of agricultural property (subject to the 7-year rule); using the annual gift exemption and other reliefs; reviewing the ownership structure of the farm (including whether to use a partnership or company structure); ensuring the farm qualifies for maximum APR and BPR; reviewing wills to maximise use of nil rate bands and spousal exemption; and considering whether to use trusts. PDA Law can advise on the most appropriate strategy for your circumstances.
Does APR apply to let farmland?
Yes — APR can apply to let farmland, but the ownership period requirement is longer. If you let agricultural land to a tenant, you must have owned it for at least 7 years (rather than 2 years for owner-occupied land) before APR applies. The relief applies to the agricultural value of the land, not any development value.

Protect Your Farm for Future Generations

PDA Law's estate planning solicitors have extensive experience advising farming families on APR, BPR, and succession planning. Contact us for a clear assessment of your position and the options available to you.

Make an Enquiry01244 757 352