A summary guide to agricultural property relief (APR)

Agricultural property relief (APR) has long been a cornerstone of succession planning for farming families. It offers significant protection from inheritance tax (IHT) on qualifying agricultural assets.

However, changes to APR are coming into effect from April 2026. That makes it more important than ever for landowners and rural business owners to understand:

• How the relief works
• What qualifies, and
• How the upcoming reforms could impact their estate planning.

This guide breaks down the essentials of APR, the differences between APR and business property relief (BPR) and what actions you can take now to prepare for the future.

What is agricultural property relief?

Agricultural property relief (APR) is a relief from inheritance tax (IHT). It applies to the agricultural value of agricultural land and property that is used for agricultural purposes.

What is the difference between agricultural property relief and business property relief?

APR is for agricultural land and property whereas BPR is a relief from IHT for business assets. APR is applied to assets, followed by BPR which is useful when there is a difference between the agricultural value of an asset and the market value of that asset. There are strict criteria for BPR.

What are the conditions for agricultural property relief?

It applies to the agricultural value of agricultural land and property that is used for agricultural purposes. The asset must have been owned by the individual for at least two years if they farm it in hand, or seven years if the land/property is let and farmed by someone else. The rate of relief is usually at 100%, apart from when there is an Agricultural Holdings Act tenancy in place of the land dated pre 1 September 1995, in which case the rate of relief is at 50%.

What qualifies as agricultural property?

Examples include; farm land, ancillary woodland, farm workers cottages, character appropriate farmhouses, buildings used for storing agricultural equipment or grain.

Are there any exclusions from agricultural property relief?

These include assets that do not meet the above definition, some examples include land used for grazing horses (livery), old farm buildings that are no longer in use and the difference between agricultural and market value of land (if development potential has been identified).

What are the changes to agricultural property relief?

From April 2026 only the rate of the relief of APR will change. The long-standing qualifying criteria for APR is not changing.

How will the current rates of APR change?

The first £1m of asset value will qualify for 100% relief, but the remaining agricultural value will only qualify for 50% relief. In some cases this will mean there is a large amount of value subject to the 40% IHT rate. The widely publicised 20% IHT relief is essentially 50% x 40%.

How will APR impact famers/landowners?

APR has been a very useful relief for farming families as it has enabled them to pass down the core farming assets on death to the next generation tax-free. The legislation had almost incentivised farmers to ‘die with their boots on’ as not only was there 100% relief from IHT but the next generation received the assets with a free uplift to market value at the date of death, which is beneficial for the base cost when calculating any capital gain on a subsequent sale.

The proposed changes to the legislation mean that if farmers have agricultural assets in excess of £1m then there will be some exposure to IHT. This liability can be paid over 10 years in annual instalments which are non-interest bearing. However, not a lot of farming businesses generate sufficient profits in order sustain the business partners, let alone producing enough income after income tax to pay off an IHT liability.

This will leave the next generation with little choice other than to sell assets in order to pay the tax bill, more than likely meaning that the farm business is no longer viable.

What can farmers and landowners do now?

There are several options that farmers and landowners have during their lifetime which can help reduce the assets in their estate when they die. There are various tax implications of each, and you should speak to an expert before taking any action. Some of these options include:

• Making gifts to the next generation
• Settling assets into Discretionary Settlements
• Gifting assets to your spouse

Can I still claim full agricultural property relief on lifetime gifts made before April 2026?

The answer is yes, you can still claim full APR on lifetime gifts made before 6 April 2026. However there are important transitional rules to be aware of.

Full APR is available for qualifying lifetime gifts made before 30 October 2024, provided the donor survives seven years from the date of the gift.

For gifts made between 30 October 2024 and 6 April 2026, this is considered a ‘transitional period’. If the donor dies on or after 6 April 2026, and within seven years of making the gift, the new rules apply, as noted above.

Conclusion

As the landscape around APR shifts, proactive planning is key to protecting your legacy and ensuring the viability of your farming business for future generations. To explore these changes in more detail and hear from our rural tax experts, join us for our upcoming webinar where we’ll cover succession planning, lifetime gifting strategies, and the practical implications of the new APR rules.

Register for the webinar here