During the Autumn Budget on 30th October, the Chancellor announced changes to Agricultural Property Relief that will come into effect from April 2026. Whilst the full details of the changes to the relief are yet to be released, our private client team explores what we currently know about the changes and how this will impact farmers and landowners.
What is Agricultural Property Relief?
Agricultural Property Relief (APR) is a valuable Inheritance tax relief for farmers and landowners providing either 50% or 100% relief on the agricultural value of land and certain buildings.
Agricultural property is defined as land used for the purposes of agriculture, as well as cottages, farm buildings and farmhouses, which are of a character appropriate to the farmland and in common occupation.
Assets need to have been owned for two years before APR can be claimed if they are being farmed by the landowner, and for seven years if the land is let.
What changes are being made to Agricultural Property Relief?
From April 2026, APR will be subject to a £1 million allowance. Any value above this allowance will only receive APR at 50% and the allowance is also shared with any assets you own which qualify for Business Property Relief (BPR).
The changes were set out in our articles following the Budget which are linked below:
Autumn Budget 2024 – Potentially painful for business owners and agricultural landowners
Autumn Budget 2024 – Changes to Business Property Relief
How will farmers and landowners be impacted by APR changes?
The following case study demonstrates how a typical farm could potentially be impacted by the proposed changes:
A husband and wife jointly own a farm consisting of 500 acres of farmland (farmed in-hand), a farmhouse, farm buildings and equipment. The total value of the property held is £9.6 million.
Their current wills leave their assets to each other in the first instance and then onto their children.
Under the current rules, no Inheritance Tax (IHT) would arise on their deaths as the full value of the farm would qualify for 100% APR or BPR.
Following April 2026, there would still be no IHT on the death of the first spouse as assets left to a spouse are exempt from IHT. However, on the death of the second spouse, IHT would be due as follows:
| Value of Farm | £9,600,000 | |
| Less: APR/BPR available on the farm | (£5,300,000) | Calculated as £1m at 100% and £8.6m at 50% |
| Less: Nil Rate Band (x2) | (£650,000) | |
| Chargeable Estate | £3,650,000 | |
| IHT at 40% | £1,460,000 |
The IHT would ordinarily be due 6 months after the date of death. However, as the assets qualify for APR or BPR then the tax can also be paid by instalments over a 10-year period i.e., £146,000 per year.
The couple’s children would therefore need to fund the tax either from the farm profits or by selling some of the land.
As farms have become less profitable over recent years following the reduction in subsidies, funding such tax payments from profits as seen in the above case study is likely to be difficult for the majority of farmers.
How we can help
Whilst we are still awaiting the full details of the changes from the Government, there is now just over a year until the changes come into effect and therefore it may be beneficial to start planning for the impact of these changes.
Considering the example above there are a few simple changes which could immediately improve the final IHT position through, for instance, updating Wills to ensure each £1 million allowance is being used effectively.
The calculation of the IHT position is also affected by these changes due to the way in which APR and BPR are calculated. The position is not therefore as straightforward as applying a 20% rate to the value of qualifying assets over £1 million. The availability of the new allowance will need to be considered as will any impact on nil rate bands. It will therefore be more important than ever for affected individuals to consider their current exposure to IHT. The position will be different for every individual depending on their personal circumstances which is why advice should be taken to ensure all options are considered.
Our private client team recommend that any affected individuals review any previous IHT planning and consider their updated position following April 2026. Get in touch with a member of our specialist team today who will be able to advise you through this process.
