Last updated: 14 October 2026
What is agricultural relief for inheritance tax?
Agricultural Property Relief (APR) reduces the value of qualifying farmland, farm buildings and farmhouses for inheritance tax (IHT). For deaths on or after 6 April 2026, 100% relief applies to the first £2.5 million of combined agricultural and business property, and 50% relief applies above that. Any unused allowance can pass to a surviving spouse or civil partner, so a couple can pass on up to £5 million with 100% relief, on top of their nil-rate bands.
What qualifies
- Land or pasture used to grow crops or rear animals
- Farm buildings, cottages and farmhouses of a “character appropriate” to the farm
- Woodland and buildings used for intensive livestock or fish rearing, if occupied with agricultural land
- Stud farms for breeding horses
- Land in certain environmental schemes, including some from April 2025
APR applies only to the agricultural value of the property, which is its value if it could only be used for farming. Development value is not covered, although Business Property Relief may cover it if the farm is a trading business.
Ownership and occupation conditions
| Who occupies the land | Minimum period |
| You farm it yourself | 2 years before death or the gift |
| Someone else farms it, for example a tenant | You must have owned it for 7 years, with it used for agriculture throughout |
How the 2026 rules work
- 100% relief on the first £2.5 million of qualifying agricultural and business property combined
- 50% relief on the excess, giving an effective IHT rate of 20%
- Lifetime gifts made on or after 30 October 2024 that become chargeable use the allowance first, oldest first
- IHT on the excess can be paid in 10 annual instalments, interest-free
Example
A widower dies in 2026 leaving farmland with an agricultural value of £4 million and his late wife’s unused £2.5 million allowance. He has £5 million of 100% allowance, so the whole £4 million is relieved at 100%.
The farmhouse
The farmhouse qualifies only if it is of a character appropriate to the farm and occupied for agricultural purposes. HMRC often challenges large farmhouses, or ones where farming has wound down.
Planning points
- Review wills to make sure both spouses’ allowances are used
- Consider lifetime gifts, which use the allowance at the time of the gift
- Keep evidence of farming activity and occupation
- Check whether diversified activities, such as holiday lets, affect relief
- Life insurance in trust can cover any IHT on the excess
Mistakes with agricultural relief
Agricultural relief only covers the agricultural value of land, not its full market value, so development value isn’t relieved. Farmhouses must be in proportion to the farmland, and they must be occupied for agricultural purposes. Keep records of how the land is farmed.
Frequently asked questions
Does APR apply to land let to a tenant farmer?
Yes, if you have owned it for 7 years and it has been farmed throughout.
Is the £2.5 million allowance per person?
Yes, and it is transferable between spouses and civil partners.
Do AIM shares share the allowance?
No. AIM shares get 50% Business Property Relief and don’t use the £2.5 million allowance.
What about capital gains tax?
On death, assets are revalued to market value, so there is no CGT. Lifetime gifts may need holdover relief.
Related: EIS and inheritance tax and reducing an estate below £2 million.
Talk to Accotax
Want this handled for you? Our team at Accotax can help with agricultural relief and estate planning. See our inheritance tax planning service, or contact us for a free, no-obligation quote.
This page is general guidance based on HMRC rules for the 2026/27 tax year, checked against gov.uk on 14 October 2026. It is not personal advice, so speak to an accountant about your own situation.
