Agricultural Property Relief (APR) reduces inheritance tax on farm properties used in a farming business. Find out what APR is, how it works and who qualifies. This also covers recent changes for farmers.

Quick Facts

• Agricultural Property Relief (APR) gives big inheritance tax relief, 100% or 50% relief for agricultural property transfers to support family farms.
• You need to meet specific criteria for APR, including land being used for agriculture for a minimum period and farmhouses being occupied by those farming, new tax caps from April 2026.
• Recent changes to APR may put more pressure on farmers with properties over £1m, so you need to plan your estate to reduce the tax paid on agricultural property transfers.

What is Agricultural Property Relief (APR)?

Agricultural Property Relief (APR) is an inheritance tax relief to support the agricultural sector by giving big tax relief on the transfer of agricultural property. The relief is 100% or 50%. This depends on the type of agricultural property and how it’s used. APR is for land or pasture used for intensive arable or livestock farming, so these key assets can be passed down through generations without crippling tax bills.

The relief is based on the agricultural value of the property, which is often lower than the market value because it doesn’t take into account alternative uses. Under current rules, one person can transfer agricultural property worth up to £1m tax free and two people can transfer up to £3m tax free. Additionally, agricultural property can be transferred to a direct descendant tax free up to certain limits. This is key to keeping family farms viable and continuous.

For many estates, claiming agricultural property relief is crucial to avoid inheritance tax. With market values often higher than agricultural values, APR can reduce the financial burden on the beneficiaries and allow them to continue farming without having to sell bits of their inheritance.

APR Eligibility

To qualify for APR you need to meet specific criteria. The land must be used in a farming business for at least 2 years if you or your controlled company occupy it, or 7 years if rented out. This is to target genuine agricultural operations not speculative land holdings.

Farmhouses must be occupied by someone actively farming or retired employees of the farm. Farm cottages must be occupied by farming employees or their spouses/civil partners under specific tenancy agreements.

The farmhouse must reflect the farming activity and full records must show the agricultural use of the property. Short term grazing licenses can help with 100% relief.

Recent changes to Agricultural Property Relief

From April 2026, recent reforms to agricultural property relief will bring new inheritance tax caps and adjustments which will hit farmers hard. The new £1m cap on 100% relief will put more pressure on properties over this value.

The introduction of tax on agricultural assets over £1m means you need to plan carefully to avoid unfair inheritance tax bills.

These changes to agricultural property also include land managed under qualifying environmental agreements so there’s a move towards environmental stewardship in farming.

Inheritance Tax Caps

The new inheritance tax caps from April 2026 are a big change for APR. The cap for 100% relief will be £1m and relief will be 50% for property over that value.

Non direct descendant tax allowances are lower, making estate planning crucial for non-direct descendants. Properties over £1m will be partially taxable so farmers need to review their estate planning. APR and BPR will share a £1m allowance for qualifying assets so the relief will be more complicated to claim.

Joint and Single Ownership

The changes have different implications for joint and single ownership. Joint owners can transfer agricultural property worth up to £3m tax free, a big advantage over single owners. This includes any property owned by the joint owners.

Single owners will need to do more estate planning due to the new £1m cap on 100% relief from inheritance tax. This will influence future property ownership structures to maximise tax benefits.

Why?

These changes are designed to alleviate the burden of unfairly high inheritance tax on small family farms and raise public funds. By capping the relief, the government wants to make sure more APR benefits go to more people and not a few. The changes will also encourage farmland to be transferred to the next generation so that farming operations can continue and be viable. The government estimates 75% of estates will be unaffected but many are worried that the true impact will be more than that and more farms will be affected than expected.

For Farmers and Rural Communities

These changes will affect farmers and rural communities. APR has always reduced the inheritance tax bill when farmland is passed down within families so farming can continue. But the changes will mainly hit the top 500 estates each year and change agricultural property ownership.

Business assets, including agricultural property, play a crucial role in estate planning and succession. Keeping 100% relief on the first £1m of agricultural and business property is key to protecting small family farms. But reduced farmland and deterrents for young farmers will impact rural sustainability and innovation.

Financial

Financially APR changes will force farmers to sell family farms to pay inheritance tax bills and will lead to a decline in land values as they sell assets to meet the increased tax liability.

The new tax will also deter investment in farmland and reduce the amount of agricultural land and overall farming sector productivity.

Social and Economic

Socially and economically the changes will add more financial pressure on farmers and will need to restructure their financial planning. This will impact long term sustainability and overall rural community health.

Less investment in rural areas will impact local services and infrastructure and make community challenges worse. Support for young farmers will be key to mitigating the effects and keeping viable farming operations going in the new landscape.

APR vs Business Property Relief (BPR)

APR and BPR both reduce inheritance tax on asset transfers but apply to different types of property. APR is for agricultural assets and BPR is for business property and gives 100% or 50% relief depending on the circumstances.

BPR will see a reduction in relief rates for unlisted shares whereas APR is based on agricultural value. This shows different approaches to tax relief depending on asset type.

How to Maximise APR Benefits

Maximising APR benefits requires estate planning. Reviewing property ownership structures will optimise benefits and transfer agricultural assets tax efficiently.

Consult a tax expert to get tailored advice on how to maximise APR benefits, ensure compliance and minimise inheritance tax. This will give you financial stability and continuity of farming.

Other Support and Finance for Farmers

Apart from APR there are other support and funding available to farmers. The government has announced £5 billion to help farmers produce food over the next 2 years.

Additional funding includes £60m for the Farming Recovery Fund and £208m to protect against serious agricultural diseases. The Sustainable Farming Incentive and Countryside Stewardship grants will also encourage sustainable farming and biodiversity.

Conclusion

In summary, understanding Agricultural Property Relief and the changes to it is key for farmers to secure their agricultural legacy. The changes bring new challenges but also opportunities for better estate planning and environmental stewardship.

By using the available support and funding farmers can manage these changes and keep their operations going and sustainable. The key is to stay informed and adapt to the changing landscape of agricultural property relief.

FAQs

What is Agricultural Property Relief (APR)?`

Agricultural Property Relief (APR) is relief from Inheritance Tax on the transfer of agricultural property and gives 100% or 50% relief depending on the type of property and how it’s used. This keeps the agricultural sector supported during estate transfers and minimises tax liability.

Who qualifies for APR?

To qualify for APR land must be used for agricultural purposes for 2 years if occupied by the owner or 7 years if let. Farmhouses and cottages must be occupied by people connected to farming.

What are the changes to APR?

Changes to APR include a £1 million cap on 100% relief from April 2026 where properties over this value will get 50% relief.

How does joint and single ownership affect APR?

Joint ownership allows you to pass agricultural property tax free with a value limit of £3 million compared to £1 million for single ownership. This can be a big advantage in estate planning.

What else is available for farmers?

Farmers can get support through government schemes like the Farming Recovery Fund, Sustainable Farming Incentive and Countryside Stewardship grants which provide funding and encourage sustainable farming.