Unearthing the changes to Agricultural Property Relief
By Andrew Heskin, Partner and ARA specialist
For many in the farming and agricultural sectors, a viable succession plan for your business might include passing on assets to a family member.
As such, you may be looking to plan for Inheritance Tax (IHT), particularly on the value of your business assets which you have spent time and effort building.
The Chancellor’s recent Spring Budget has introduced some key changes to the way that a particular relief, Agricultural Property Relief (APR), is applied to certain agricultural assets.
What is Agricultural Property Relief?
Agricultural Property Relief is a type of Inheritance Tax relief on agricultural property passed on either during your lifetime or in your Will.
Agricultural property that qualifies for Agricultural Property Relief is land or pasture that is used to grow crops or to rear animals. It can include:
- Growing crops
- Stud farms for breeding and rearing horses and grazing
- Trees that are planted and harvested at least every 10 years (short-rotation coppice)
- Land not currently being farmed under the Habitat Scheme
- Land not currently being farmed under a crop rotation scheme
- The value of milk quota associated with the land
- Some agricultural shares and securities
- Farm buildings, farm cottages and farmhouses
However, certain things do not qualify for APR, including:
- Farm equipment and machinery
- Derelict buildings
- Harvested crops
- Livestock
Are there other requirements?
There are other conditions you must meet to be eligible for APR.
The property must be located in the UK, the Channel Islands, the Isle of Man or the European Economic Area (EEA).
Additionally, the property must have been owned and occupied for agricultural purposes immediately before it was transferred for at least two years if occupied by the owner or their spouse, or seven years if occupied by someone else.
Relief is generally due at 100 per cent if these conditions are met and the land was either:
- Farmed by the person who owned it
- Farmed by someone else on a short-term grazing licence or let on a tenancy that began on or after 1 September 1995.
What is changing?
Announced by the Chancellor is his Spring Budget, lands under environmental agreements will also be eligible for Agricultural Property Relief (APR) from 6 April 2025.
Whether you are part of the Environmental Land Management scheme in England or involved in any similar green initiative, you will be covered by the benefits of APR from this date.
Under APR, you can pass on some agricultural property free of Inheritance Tax, either during your lifetime or as part of your Will.
It doesn’t matter if your land was actively farmed or previously qualified for APR. If it’s been tagged as ‘agricultural land’ for the past two years, you’re set to take advantage of this change.
Need more advice? Get in touch.