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Agricultural Tax Planning

Agricultural tax planning has rarely mattered more than it does right now.
The October 2024 Budget changes to Agricultural Property Relief (APR) and Business Property Relief (BPR) mean that many farming families and landowners face a significantly higher inheritance tax exposure than they did before. We work alongside your accountant and solicitor to make sure your assets are structured as efficiently as possible, and that any claim for relief is properly evidenced and robustly defended.

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Protecting what you have built from an increasingly assertive taxman

The reliefs available to farming families, primarily Agricultural Property Relief and Business Property Relief, remain valuable tools, but they are no longer as straightforward to claim as they once were.

HMRC is increasingly selective in its approach, and the October 2024 Budget changed the landscape significantly. Whereas there had previously been no cap on the availability of APR and BPR, the budget limited 100% relief through APR and BPR to £1m per tax payer. Under intense lobbying the Government increased the threshold to £2.5 million of qualifying assets from April 2026. Above that threshold, the effective tax rate is 20% on qualifying assets. We are however already seeing IHT cases being scrutinised more closely than ever.

Knowing what constitutes agricultural property for HMRC’s purposes is no longer straightforward. Farmland, farmhouses and certain farm buildings can qualify, but HMRC and the Valuation Office are increasingly arguing that relief should apply only to the agricultural element of a property’s value, not its full market value. For a farmhouse this distinction can be significant. HMRC will now routinely argue that 30% of the value is non-agricultural. We have successfully challenged HMRC’s position on farmhouse valuations and also won numerous cases where HMRC were arguing against allowing APR on the farmhouse at all.

Capital Gains Tax must also be considered alongside inheritance tax, particularly where a disposal is being contemplated. Business Asset Disposal Relief, lifetime transfers and the use of trusts all have a role to play depending on your circumstances, and the interaction between these reliefs and your wider succession plan needs careful thought. Our Chartered Surveyors work closely with solicitors and accountants throughout this process, and can refer you to appropriate advisers where needed.

KEY CONTACTS

Leo Hickish
FRICS MBIAC
Tunbridge Wells

01892 509280

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Wildflower field margin alongside a green cereal crop

Scheme income affects your tax position too

Ongoing grant and environmental scheme agreements can have significant inheritance tax and capital gains tax implications, so they should be reviewed alongside your broader estate and tax planning objectives, not as a standalone decision.

Explore Grants & Environmental Schemes

Common questions about agricultural tax planning

Agricultural Property Relief (APR) is a relief from Inheritance Tax that allows qualifying agricultural assets, including farmland, farmhouses and certain farm buildings, to be passed on with significantly reduced or no inheritance tax liability. Under current rules, 100% relief applies on the first £2.5m of combined APR and BPR qualifying assets.

Business Property Relief (BPR) applies to business assets rather than specifically agricultural assets. For farming businesses, BPR can sometimes cover assets that don’t qualify for APR such as machinery, livestock and crops in store. Reliable and up-to-date stocktaking valuations are now essential.

The two reliefs are often used together, but the rules governing each are distinct and the interaction between them needs careful planning.

Not automatically. Several qualifications must be met including the “character appropriate” test. It is not difficult to imagine that someone might struggle to argue that a 12 bedroom mansion was out of keeping with a land holding of less than 100 acres. The house must also have been occupied for the purposes of agriculture, and the occupier must be actually farming or managing the farm. Great care is needed to maintain this qualification as the farmer passes on some of the management responsibilities in their later years.

Capital Gains Tax may be payable on any gain made on a disposal of agricultural land. However, reliefs including Business Asset Disposal Relief and Rollover Relief can significantly reduce or eliminate the liability depending on the circumstances. Planning ahead of any disposal is essential to make the most of available reliefs.

Depending on your circumstances, yes. Lifetime transfers and the use of trusts have become more relevant following the Budget changes, as part of a broader strategy to manage inheritance tax exposure over time. These are complex areas that need to be considered alongside your wider succession plan and in conjunction with your solicitor and accountant. Such lifetime transfers do not suit every case by any means.

The first step in any review of your inheritance tax exposure is to assess the values involved. We are experienced in valuing agricultural property and in stock taking valuations, and in assessing where APR and BPR apply, including issues such as the farmhouse tests and the land occupation needed to meet the strict APR and BPR rules. Agricultural tax planning also needs input from accountants and solicitors, and we work with your other advisers to make sure the overall plan is coherent and tax efficient for both your property and financial assets.