Q: I own some agricultural properties that I hope to pass on to my sons when the time comes, but I’ve heard that there might be changes in the upcoming Budget. What are the current rules for Agricultural Property Relief on Inheritance Tax, and what might change?
A: Currently, Agricultural Property Relief (APR) allows you to pass on agricultural property free from Inheritance Tax (IHT), provided the property meets HMRC’s qualifying conditions. To qualify, the property must be used for agricultural purposes, such as land for crops, pasture for livestock, or certain buildings like farmhouses and cottages. The property must also have been owned and used for agricultural purposes for at least two years if farmed by the owner or their spouse, or for seven years if let out to someone else. Additionally, the size and nature of buildings must be appropriate to the agricultural activity to qualify, and the relief only covers the agricultural value of the property – not the market value if it exceeds the agricultural value, such as a farmhouse that could be sold as a residence.
The relief is generally available at 100% if the land is actively farmed or let under a qualifying tenancy, but in other cases, such as older tenancies, relief may only be available at 50%.
However, speculation about the upcoming Budget suggests there may be changes to IHT, including potentially removing the favourable treatment for agricultural and business property. If this happens, your agricultural properties could face higher IHT charges, as they may no longer qualify for this relief.
It’s a good time to review your estate planning.
