Changes to Agricultural Property Relief

No doubt the changes to Agricultural Property Relief (APR) announced in the Budget (October 2024) will have reached your attention. Whilst we await more information about the timing and fine details of the new scheme, many farmers and landowners will be asking themselves what they should do if all goes ahead as announced.

Just to refresh memories the key details are that from the 6th of April 2026:

• APR at 100% will be available for the first £1m of combined agricultural and business property only.

• Once the £1m allowance is exceeded, the maximum rate of relief will be 50% giving an Inheritance Tax (IHT) rate of 20%.

• There are no changes to the Nil Rate Band £325,000 and Residence Nil Rate Band £175,000 and spousal exemption applies.

As an example, a typical farmer will be able to pass on assets worth £1,325,000 free of IHT on death and £2,650,000 between a married couple, owning a farm together.

What are the options now?

1. Make a Will if you don’t have one, and if you have an existing Will, review it to consider how the changes may affect you.

2. Consider early succession planning. If you know that the next generation will succeed you into the family farm business then gifting agricultural property during your lifetime can reduce the value of the estate, lowering IHT liability. Gifts are currently exempt from IHT if you live for seven years after the gift is made, so considerable tax savings could be made.

3. Consider using a Trust to settle some assets worth more than £1m that qualify for 100% relief into a new Trust. A Trust can help you to retain some control over assets whilst ensuring they are passed to the next generation(s).

4. Review the ownership of the farming business and change its structure to own a lower percentage of the shares, reducing the size of your estate.

5. Consider an insurance policy to cover some or all of the potential IHT liability and write the policy into Trust so the proceeds are kept out of the estate on death, giving the estate liquidity to pay the tax due without having to sell assets.

All these options should be reviewed along with your tax adviser, before making any final decisions and we are happy to work alongside them to provide you and your family with the best outcome for your family farm.

If you would like to arrange to chat to our team about some of the options available to you now, we can advise not only on your Will but also on the different options for structuring your farm business.

Whilst the debate and protests are likely to run on into the New Year, having some options available which are relevant to you and your individual circumstances can be reassuring.

Get in contact to arrange a call back or email a.astley@gullands.com