The advantages and urgent considerations of Agricultural Property Relief

By Heather Bright, Partner and ARA specialist

While the new Labour Government has promised not to raise VAT, Income Tax, or National Insurance, there remains some uncertainty regarding potential future tax changes.

The possibility of including farmland in Inheritance Tax (IHT), although not explicitly stated, has left room for concern among landowners.

Another possible change is the removal of Agricultural Property Relief (APR), a valuable tax relief currently benefiting farmers across England. Although this remains a rumour, it is crucial for farmers to understand the advantages of APR and act while this relief is still available.

What is Agricultural Property Relief?

Agricultural Property Relief (APR) is a form of IHT relief that applies to agricultural property, including land, buildings, and farmhouses.

This relief can significantly reduce the value of the property for IHT purposes, making it easier for farmers to pass on their agricultural assets to the next generation without incurring prohibitive tax liabilities.

Advantages of Agricultural Property Relief

APR can reduce the value of agricultural property by up to 100 per cent for IHT purposes, depending on the type and use of the property.

This reduction can alleviate the financial burden on heirs, ensuring that farming operations can continue without the need to sell off assets to pay taxes.

By lowering the IHT liability, APR supports the continued use of land for agricultural purposes. This is vital for maintaining the agricultural heritage and ensuring the long-term viability of farming enterprises.

APR provides farmers with more options in estate planning, allowing them to transfer property to heirs in a tax-efficient manner.

This flexibility can help in structuring the estate to maximise benefits and support the future generation of farmers.

Why act now?

With the Labour Government in power, there are speculative concerns that APR could be modified or removed entirely.

Although no official changes have been announced, there could well be potential impacts on land and farm sales if APR is altered. This uncertainty makes it imperative for farmers to consider taking advantage of APR while it is still in place.

Ensuring eligibility for APR

To benefit from APR, farms must be active enterprises. This means that the property must be used for agricultural purposes, and the business should demonstrate ongoing agricultural activity. Proper documentation and evidence of active farming are crucial to qualify for this relief.

Given the potential for tax reforms under the new Labour Government, it is advisable to act now and ensure your farm is well-positioned to benefit from APR.

For more information and tailored advice regarding APR, contact us today. Let’s secure your farm’s future and make the most of the opportunities available.