Answers · UK 2025/26
How does Agricultural Property Relief work after the April 2026 changes?
Agricultural Property Relief (APR) reduces Inheritance Tax on the agricultural value of farmland and farm buildings. 100% APR applies to owner-occupied or let agricultural property held for qualifying periods. From April 2026 (Budget 2024 reform), APR and Business Property Relief (BPR) share a combined £1m cap -- property above that cap qualifies for 50% relief only, giving an effective IHT rate of 20% rather than 40%.
Full answer
Agricultural Property Relief (APR) is governed by IHTA 1984 ss.115-124. It provides relief from Inheritance Tax on the agricultural value of qualifying agricultural property -- meaning the value the property would have if it could only be used for agricultural purposes (not its open-market development value). **Pre-April 2026 APR rules (unchanged elements):** - 100% APR on agricultural value if: owner-occupied and farmed for at least 2 years before death/transfer; OR let to a tenant farmer and owned for at least 7 years - 50% APR on agricultural value of property let under pre-1995 tenancy agreements (before the Agricultural Tenancies Act 1995 made 7-year ownership sufficient) - The agricultural value is strictly the agricultural-use-only value -- if the property has development potential, the "hope value" excess is NOT covered by APR (though BPR might cover it if it is a business asset) **What qualifies:** Farmland, farm buildings, farmhouses (only if appropriate in character and size to the farming operations), cottages occupied by farm workers, and woodland managed as part of the farming operation. **The April 2026 reform (Budget 2024):** From 6 April 2026, a combined APR + BPR allowance applies: the first £1,000,000 of qualifying agricultural property (and qualifying business property) continues to benefit from 100% relief. Above the £1m combined cap, only 50% relief applies -- resulting in an effective IHT rate of 20% (50% of 40%) on the excess. Example: an estate has £3m of qualifying farmland. APR/BPR apply 100% on the first £1m (saving £400,000 IHT), then 50% on the next £2m -- IHT payable = 20% x £2m = £400,000. Without any relief the IHT would be £1.2m on a £3m estate assuming no other nil rate bands. **Agricultural tenancies and succession:** APR continues to be a key relief for farmers passing farmland to the next generation. The reform significantly affects large farm estates. Some IHT can be paid in annual instalments where the estate includes farmland.
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This answer is informational only and does not constitute financial, tax or legal advice. Figures are for the 2025/26 UK tax year. See our methodology and sources.