How is Agricultural Property Relief (APR) calculated in the UK?

Full answer

Agricultural Property Relief (APR) is an Inheritance Tax relief that reduces the agricultural value of qualifying property passing on death or as a lifetime gift. **Relief rates** - **100% relief**: owner-occupied farmland and farm buildings where the deceased (or donor) has farmed the land themselves for at least 2 years immediately before transfer. Also applies to landlord-owned land let on a tenancy starting on or after 1 September 1995. - **50% relief**: land let on tenancies starting before 1 September 1995 (most older grazing and arable lettings). **New £1 million cap from April 2026** The Autumn Budget 2024 announced that from 6 April 2026, the combined value of assets eligible for 100% APR and Business Property Relief (BPR) is capped at £1 million per person. Assets above £1 million still qualify for APR/BPR but only at 50% rate. Couples can potentially shelter £2 million at 100%. **What qualifies as agricultural property?** - Arable and pasture land - Farmhouses and farm cottages (must be of a character appropriate to the property) - Farm buildings, stud farms, market gardens, woodland ancillary to farming - Not: farm equipment, livestock, crops, or non-agricultural buildings **Occupation test** The property must have been occupied for agricultural purposes for at least 2 years (owner-occupied) or owned for 7 years if let (ownership test). **Worked example (post-April 2026)** A farmer dies with £1.5 million of owner-occupied farmland. The first £1 million is relieved at 100% (nil IHT), the remaining £500,000 at 50% relief = £250,000 agricultural value chargeable. After the nil-rate band (£325,000), no further IHT is due on this alone — but any other estate assets would stack above the nil-rate band.

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