Inheritance Tax: Changes to Agricultural Property Relief

As has been widely discussed, the government seek to make changes to the current application of agricultural property relief which is set to come into force in April 2026.

What this means:-

1. The first £1,000,000 worth of combined agricultural and business assets will still qualify for APR at 100% relief.

   
   

2. For anything over the £1m threshold the rate of APR is reduced to 50% which means inheritance tax will be applied at a rate of 20%  (rather than the usual 40%).

   
   

3. It is important to remember that this allowance is on top of all the other IHT allowances such as the spousal exemption, the nil rate band and the residence nil rate band.

   
   

4. The current nil rate band is £325,000 this can be doubled between spouses so on the second death a nil rate band of £650,000 can be applied.

   
   

5. There is also the additional residence nil rate band which is a further £175,000 per person which can be applied against the value of your main home where this is being left to your spouse or direct descendants (ie children or grandchildren).

   
   

6. This means that where you have a farming partnership between husband and wife and you wish to leave your farm to your children - no tax will be payable on assets up to a value of £3,000,000.

If you would like to discuss this or general IHT planning in more detail then please do contact the office for an appointment and we will happy to chat with you.