Agriculture & Farming UK-wide

Agricultural Property Relief and Business Property Relief for farms

How Agricultural Property Relief (APR) and Business Property Relief (BPR) work for farms and agricultural estates. Understand the allowances, qualifying criteria, calculate your potential liability, and plan your succession effectively.

Guide summary

You must check your farm estate against the Agricultural Property Relief (APR) and Business Property Relief (BPR) rules. From 6 April 2026, you get full (100%) inheritance tax relief on the first £2.5 million of qualifying assets per person (or £5 million for a couple). Above that, relief drops to 50%, meaning you pay an effective tax rate of 20% on the excess value.

  • Check if your farm assets qualify for APR or BPR before April 2026
  • APR and BPR combined limit is £2.5 million per person for 100% relief
  • Married couples can pass up to £5 million with 100% relief
  • Above £2.5 million, only 50% relief applies (20% effective IHT rate)
  • Own qualifying assets for at least 2 years before you claim relief
  • Farmhouses must be used by an active farmer to qualify for APR
  • Payment can be made in 10 yearly interest-free instalments
  • AIM shares reduce to 50% relief from April 2026
  • Couple can potentially pass over £5.6 million tax-free with nil-rate bands
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Related guides in Business Tax Overview

Agricultural Property Relief (APR) and Business Property Relief (BPR) can significantly reduce or eliminate the inheritance tax due when a farm passes between generations. However, 100% relief is capped at a combined threshold per person, meaning larger estates may face a tax liability.

This guide helps you understand how APR and BPR work for farms, assess your exposure, and plan your next steps.

This is a complex area with significant financial implications. We strongly recommend seeking professional advice from a solicitor or tax adviser experienced in agricultural estates before making any decisions.

How APR and BPR relief works

Qualifying agricultural property and business assets can receive 100% relief from inheritance tax up to a combined allowance of £2.5 million per person.

Above this allowance, relief reduces to 50%. This means an effective inheritance tax rate of 20% on the excess value (half the standard 40% rate).

These rules took effect on 6 April 2026 under the Finance Act 2026 (section 65 and Schedule 12). The allowance was raised from the originally announced £1 million to £2.5 million on 23 December 2025. It is frozen at that level initially, then indexed to CPI from 6 April 2031.

Agricultural Property Relief (APR) thresholds

Business Property Relief (BPR) thresholds

For farms, BPR covers business trading assets that do not qualify for APR. This typically includes machinery, livestock, harvested crops, and trading stock.

Key points about the combined allowance

The £2.5 million allowance applies to APR and BPR combined. You cannot claim £2.5 million for APR and another £2.5 million for BPR. The total across both reliefs is £2.5 million per person.

The allowance is fully transferable between spouses and civil partners, in the same way as the nil-rate band. This means a couple can pass on up to £5 million in qualifying agricultural and business assets with 100% relief. Where the first death occurred before 6 April 2026, the full £2.5 million allowance is treated as available to transfer to the estate of the surviving spouse or civil partner.

These allowances are in addition to the standard nil-rate bands (£325,000 per person, plus the £175,000 residence nil-rate band if passing a home to direct descendants - although the residence nil-rate band is tapered by £1 for every £2 of estate value over £2 million, so it is rarely available to larger farming estates). A farming couple could therefore potentially pass on more than £5.6 million tax-free in total.

What property qualifies for APR

APR applies to the agricultural value of qualifying property. This is the value the property would have if it could only be used for agriculture. For land with development potential, the agricultural value may be significantly less than market value.

Qualifying agricultural property includes:

  • Agricultural land and pasture
  • Woodland and land used for timber if part of a farming operation
  • Farm buildings used for farming purposes (barns, grain stores, livestock housing)
  • Farmhouses - but only if occupied for the purposes of agriculture
  • Cottages and buildings occupied by farm workers

The farmhouse question

Farmhouses are a common area of dispute with HMRC. To qualify for APR, the farmhouse must be:

  • Occupied by someone actively involved in farming the land
  • Of a character appropriate to the agricultural land
  • Proportionate in value to the farm (HMRC often challenges farmhouses worth more than the farming land and buildings)

A farmhouse used as a retirement home after the farmer stops working, or one that has been substantially extended beyond agricultural needs, may not qualify for APR.

Environmental land management agreements

APR has been extended to land subject to certain environmental land management agreements (such as SFI and Countryside Stewardship). This means land taken out of agricultural production for environmental purposes may still qualify for APR, protecting farmers who participate in agri-environment schemes.

What assets qualify for BPR

BPR covers business assets used in the farming trade that are not agricultural property. For farms, this typically includes:

  • Tractors, combine harvesters, and other machinery
  • Livestock (breeding stock and trading animals)
  • Harvested crops and grain in store
  • Trading stock (feed, seed, fertiliser)
  • Partnership interests in a farming partnership
  • Shares in a family farming company

Important exclusions

Some assets do not qualify for BPR:

  • Investment assets (property let to third parties)
  • Holiday let cottages (treated as investment, not trading)
  • Land let out under grazing licences or farm business tenancies (may qualify for APR instead if agricultural)
  • Excepted assets - assets not used in the business

Ownership and occupation periods

To qualify for BPR, the asset must have been owned by the deceased for at least 2 years before death. For APR, the property must have been occupied by the owner for agricultural purposes for 2 years, or owned for 7 years while occupied by someone else (such as a tenant) for agriculture throughout. For inherited property, the previous owner's period of ownership can count if they also qualified for the relief.

AIM shares

Shares listed on AIM (Alternative Investment Market) only receive 50% BPR relief. This affects farming companies whose shares are traded on AIM.

ASSET VALUE 2500000

Farms under £2.5 million

If your total APR and BPR qualifying assets are under £2.5 million per person (or £5 million for a couple, as the allowance is transferable), you will continue to receive 100% relief and pay no inheritance tax on those assets.

However, you should still:

  • Get a professional valuation to confirm your position
  • Consider future value increases (land prices can rise significantly)
  • Review your will to ensure reliefs apply correctly
  • Check that your farmhouse qualifies for APR
GOV.UK guidance on APR (opens in a new tab)

How to calculate your potential IHT liability

To understand your exposure, estimate your total estate value and how it splits between APR-qualifying, BPR-qualifying, and non-qualifying assets.

Step 1: Get a current valuation

Instruct a qualified agricultural valuer (RICS or CAAV member) to value:

  • Agricultural land and buildings at agricultural value
  • The farmhouse (with and without APR)
  • Machinery and livestock
  • Non-agricultural assets (diversified businesses, let property)

Step 2: Categorise your assets

Asset category Typical relief
Farmland, farm buildings APR at 100% to threshold, 50% above
Farmhouse (if qualifying) APR at 100% to threshold, 50% above
Machinery, livestock BPR at 100% to threshold, 50% above
Let cottages, diversified property Likely no relief - full 40% IHT
Personal assets, savings No relief (use nil-rate band)

Step 3: Calculate liability - worked example

Example: a farm worth £4 million owned by one person

  • APR/BPR qualifying assets: £3.5 million
  • First £2.5 million: 100% relief = no IHT
  • Remaining £1 million of qualifying assets: 50% relief = £200,000 IHT (40% on the unrelieved £500,000)
  • Non-qualifying assets: £500,000 - the nil-rate band (£325,000) leaves £175,000 taxable at 40% = £70,000. The residence nil-rate band is not available because it is tapered by £1 for every £2 of estate value over £2 million, and is lost entirely above £2.35 million
  • Total IHT: £270,000

The same farm owned by a married couple: with the fully transferable allowance, the couple has £5 million of combined 100% relief. The £3.5 million of qualifying assets are fully relieved, and the £500,000 of non-qualifying assets are covered by the two nil-rate bands (£650,000 combined). No inheritance tax is due.

Without APR/BPR relief: the same estate would face significantly higher inheritance tax (100% of value above nil-rate bands at 40%).

PARTNERSHIP Requirement

Family farming partnerships

If your farm operates as a partnership, each partner's share of the partnership assets is valued separately for IHT purposes. This can be beneficial:

  • Each partner has their own £2.5 million APR/BPR allowance
  • Partnership interests qualify for BPR at 100% to threshold
  • Careful structuring of capital accounts can help succession planning

Review your partnership agreement to ensure succession provisions work with the IHT rules. Consider whether the current profit and capital sharing arrangements are optimal for your succession plans.

BPR for partnerships (opens in a new tab)
LIMITED COMPANY Requirement

Family farming companies

Shares in an unquoted trading company (including family farming companies) can qualify for BPR. However:

  • The company must be carrying on a trade (not mainly investment)
  • Shareholdings must have been held for 2 years
  • The combined APR/BPR allowance of £2.5 million applies

If your farm is already incorporated, or you are considering incorporation, take specialist advice on how the rules affect your position. Incorporation can have benefits for lifetime tax planning but may complicate IHT.

BPR for company shares (opens in a new tab)

Payment options if IHT is due

If inheritance tax is due on agricultural or business property, the estate can pay in instalments rather than finding the full amount immediately.

This payment option may make it possible to pay IHT from farm income without selling land. However, you need to model whether the farm can generate sufficient cash flow to meet the annual instalments.

Action steps for succession planning

Farmers should take a proactive approach to inheritance tax planning:

  1. 1

    Get a professional valuation

    Instruct a RICS or CAAV agricultural valuer to value your farm, separating agricultural value from market value where relevant. This is essential to understand your exposure under the current rules.

  2. 2

    Review your will

    Check your will takes full advantage of APR and BPR. The £2.5 million allowance is fully transferable between spouses and civil partners, but correct drafting is still essential. Consider whether assets should pass in a different order.

  3. 3

    Consider lifetime giving

    Gifts of agricultural property or business assets can become exempt after 7 years (potentially exempt transfers). Weigh this against losing your CGT base cost and the risk of dying within 7 years. Gifts with reservation of benefit do not work.

  4. 4

    Review your business structure

    If farming as a sole trader, would a partnership with your successor give more flexibility? If already incorporated, is the shareholding structure optimal? Get professional advice on the best structure for your situation.

  5. 5

    Consider insurance

    A life insurance policy written in trust can provide funds to pay IHT without forcing a farm sale. The premiums may be expensive for older farmers, but the certainty can be valuable.

  6. 6

    Document everything

    Keep evidence of active farming. HMRC may challenge APR claims years after death. Document who lives in the farmhouse and their role in the farm business.

When to seek professional advice

This guidance provides an overview, but inheritance tax planning for farms is complex. Seek professional advice if:

  • Your farm is worth more than £2.5 million
  • You have diversified income streams (holiday lets, renewables, contracting)
  • Your farmhouse is a significant proportion of the total value
  • You are considering lifetime gifts or restructuring
  • You have children or successors with different interests
  • You want to retire but remain living in the farmhouse

Who can help

  • Solicitor - for will drafting and legal structures
  • Accountant or tax adviser - for tax calculations and planning
  • Agricultural valuer (RICS/CAAV) - for asset valuations
  • Financial adviser - for insurance and investment options

Look for professionals with specific agricultural experience. The sector has unique rules that generalists may not understand fully.