Protecting the Family Farm: What the Incoming Allowance Means for Agricultural Property Relief

Agricultural Property Relief (APR) is an important Inheritance Tax relief. Where it applies, the value of Qualifying Agricultural Property transferred during a person’s lifetime or on their death may be reduced – often to nil – when calculating any Inheritance Tax liability. The aim of this is to prevent working farms from having to be sold or broken up when a farm owner dies.

From 6 April 2026 a new £2.5 million cap to this allowance will apply to assets qualifying for the 100% rate of APR. The value of business assets may qualify for Business Property Relief and the cap applies to property qualifying for APR or BPR, or a combination of both. Previously, this allowance was unlimited and now means that where the qualifying agricultural and business property owned on a person’s death exceeds £2.5 million in aggregate, the relief on the excess will reduce to 50%, resulting in this excess being taxed at an effective rate of 20%.

This allowance will be transferable between spouses and civil partners if unused on or before death – not part of the original proposal, but the subject of a more recent announcement. Consequently, where qualifying agricultural and/or business property passes between spouses or civil partners on the first death (and is, therefore, spouse exempt leaving the APR/BPR allowance unused), any unused allowance is transferred to the spouse or civil partner on whose later death it may be claimed. This means that it will be possible for up to £5 million of qualifying assets to be eligible for 100% relief on the second death if conditions are met.

What is Qualifying Agricultural Property?

‘Qualifying Agricultural Property’ is not limited to farmland; farm buildings, farmhouses, farm cottages, woodlands, and controlling shares and securities in agricultural companies can also qualify in appropriate circumstances. Ultimately what constitutes agricultural property is a question of fact and it must be demonstrated that that the property is occupied and used for agricultural purposes.

APR is also subject to ownership and occupation conditions. Broadly, the property must either have been occupied for agricultural purposes by the owner for at least two years prior to the transfer or their death, or owned for at least seven years and let for agricultural purposes for that period.

As mentioned above, APR reduces the value of qualifying agricultural property for Inheritance Tax purposes. Where 100% relief applies, the taxable value is reduced to nil. In some circumstances, however, relief is available at only 50%. While the new allowance will extend this, under the current rules the 50% rate commonly arises where land is let to a tenant under a tenancy which pre-dates 1 September 1995, or in circumstances where vacant possession is not recoverable within two years of the transfer.

What Does the Incoming Allowance Mean for Farm Owners?

While APR remains invaluable, it is important for farm owners to note that the tax-free limit will be restricted from April 2026. Early planning is needed to ensure assets qualify for APR so the relief can be claimed, and to ensure that the tax-free allowance can be utilised as far as possible.

Taking expert advice is often worthwhile to avoid an unnecessary inheritance tax liability. OurPrivate Client team provides comprehensive inheritance tax planning advice alongside related Will writing and estate administration services to help owners protect their farm’s future.

If you would like tailored advice on securing APR or planning ahead of the 2026 allowance changes, please contact our Private Client team, we’re here to help you protect your farm for future generations.

About the Author

Aedan is a Trainee Solicitor in the Private Client team at Machins. He joined the firm in July 2022 and has gained experience across several departments, including Residential Conveyancing, Dispute Resolution, Commercial Property and Public Family. Before joining Machins, he volunteered with Citizens Advice Luton and undertook a range of pro bono legal work. Aedan holds a Distinction in the Legal Practice Course from the University of Hertfordshire and a First-Class Honours degree in Law and Sociology from the University of Kent.