How do I claim Agricultural Property Relief to reduce IHT on a farm?

Full answer

Agricultural Property Relief (APR) is one of the most valuable IHT reliefs available, potentially removing the entire agricultural value of a farm from an estate. It is governed by the Inheritance Tax Act 1984 sections 115-124C. Qualifying conditions: 1. The property must be 'agricultural property' in the UK, Channel Islands, or Isle of Man: agricultural land or pasture; woodland or buildings occupied with and ancillary to the land; cottages, farm buildings, and farmhouses that are of a character appropriate to the property; certain rights over agricultural land. 2. Ownership period: you must have owned the property for at least 2 years before death (if you farmed it yourself or through a farming company or partnership) OR at least 7 years before death (if the land was let to a farming tenant and farmed by that tenant). 3. The property must have been occupied for agricultural purposes throughout the ownership period. Relief rate: 100% on agricultural value for owner-occupiers and most let land with post-September 1995 tenancies; 50% for certain pre-1995 tenanted land (though most claimants can access 100%). What APR does NOT cover: the development value of farmland (i.e. the premium above agricultural value attributable to planning potential); non-agricultural assets such as farmhouses that are not 'of a character appropriate' (HMRC scrutinises farmhouses -- a large house on a small farm may not qualify); farm equipment (though BPR may help); diversified business activities that are not agricultural. Business Property Relief (BPR): where APR does not cover the full value of a farming business (e.g. development value, farm shop, holiday lets, machinery), BPR at 100% or 50% may be available if the operation is a qualifying business. BPR and APR are claimed together. From April 2026 -- important: the government announced in the October 2024 Budget a change to APR and BPR: from April 2026, combined APR/BPR relief above GBP 1 million will be limited to 50% (i.e. an effective 20% IHT rate on value above GBP 1 million, rather than the current 0%). This was hugely controversial in the farming community. At the time of writing the legislation was progressing through Parliament -- verify the current position at gov.uk before relying on full relief above GBP 1 million. How to claim: APR is claimed on form IHT400 (the main IHT account) with supplementary schedule IHT414 (Agricultural Relief). You must provide details of the property, its agricultural use, and any tenancy arrangements. A professional agricultural valuation should be obtained. Specialist advice from a solicitor and accountant experienced in agricultural estates is essential.

Try the calculator