Planned changes to agricultural property relief
From April 2025, the UK government is significantly tightening the rules around agricultural property relief (APR), and if you own farmland or have agricultural interests, you need to pay attention. This change affects inheritance tax (IHT) planning for farmers and rural landowners across England, Wales, and Scotland, and it’s one of the most substantial shifts in agricultural taxation in recent years.
At Severn Accounting, we work with many farming clients in the Midlands and beyond, so we’ve put together this guide to help you understand what’s changing and what you might need to do about it.
What is agricultural property relief?
First, a quick recap. Agricultural property relief has long been a cornerstone of tax planning for farming families. It allows you to claim relief on the value of agricultural property (land used for farming, plus certain buildings and equipment) when calculating inheritance tax on your estate. In most cases, APR has provided 100% relief, meaning the value of eligible farmland is effectively removed from your IHT liability.
This has made it possible for many farming families to pass land and assets to the next generation without facing a punishing IHT bill. For estates worth millions, the relief has been genuinely transformative.
The changes coming in April 2025
From 6 April 2025, APR will be restricted. The new rules introduce a £1 million nil-rate band specifically for APR claims. Here’s what that means in practice:
The first £1 million of agricultural property value per person will continue to attract 100% APR. After that threshold is exceeded, APR will be withdrawn entirely on the excess, and standard IHT will apply at 40% on the remainder of the estate (assuming the nil-rate band has been used).
This is a significant tightening. For a farmer with £2 million in qualifying agricultural property, £1 million is covered as before, but the other £1 million will be subject to inheritance tax at 40% — a potential bill of £400,000.
Married couples and civil partners can combine their allowances, effectively creating a £2 million threshold per household, provided both have unused APR entitlements.
Who will be affected?
The impact is most acute for farmers and landowners with substantial property holdings. Anyone with agricultural property valued at more than £1 million (or £2 million for a couple) will face a material increase in their potential inheritance tax liability.
It’s worth noting that the changes apply regardless of the size of your overall estate. Even if you’re within the standard IHT nil-rate band of £325,000 per person, once you exceed the £1 million APR threshold, the excess agricultural property loses relief and falls liable to IHT.
The relief will continue to apply to the same categories of property: farmland held for at least two years, farm buildings, and certain farm machinery and equipment. However, the monetary protection is now capped.
What you should consider now
If you own agricultural property worth more than the new thresholds, it’s time to review your estate plan. There are still options available, though the landscape has shifted:
Business property relief (BPR) might still apply to some assets, particularly if your farming operation is structured as a trading business. This operates separately from APR and may offer additional protection.
Gifting strategies become more relevant. Seven-year gifts are outside your IHT estate, allowing you to gradually transfer value to beneficiaries over time without triggering the April 2025 changes.
Trusts and other structures may help, though these need careful design and professional oversight. The rules here are complex, and what works depends entirely on your circumstances.
Review of entity structures — whether you farm as a sole trader, partnership, or limited company can affect both APR eligibility and tax efficiency more broadly.
Action points for farming clients
Don’t wait until April to think about this. By then, the opportunity to plan is behind you. Now is the time to:
- Get a professional valuation of your agricultural assets
- Review your current will and estate plan
- Discuss your options with an accountant and tax adviser familiar with agricultural clients
- Consider your family succession intentions and what’s realistic given the new rules
The changes are real, but they’re not inevitable in their impact. Thoughtful planning can still make a substantial difference.
For tailored advice, contact Severn Accounting — we’re here to help.