Agricultural Property Relief (APR)

Key facts

APR provides 100% relief on agricultural property where the transferor had vacant possession or a right to obtain it within 24 months.
APR provides 50% relief on tenanted agricultural property (where the tenancy started before 1 September 1995).
The relief applies to the agricultural value only — not any development or “hope” value.
The land must have been occupied for agricultural purposes for at least 2 years (owner-occupied) or 7 years (tenanted).
From April 2026: 100% APR is capped at £1 million (combined with BPR); above that, 50% relief applies.

What Is Agricultural Property Relief?

Agricultural Property Relief (APR) is an IHT relief that reduces the agricultural value of qualifying agricultural property transferred on death or during lifetime. The relief can be 50% or 100%, depending on the type of tenancy or ownership.^[1]

APR is vital for family farms, helping to ensure that agricultural businesses can be passed down through generations without the farm having to be sold to pay the IHT bill.

APR Rates

Type of Interest	Relief Rate
Owner-occupied farmland with vacant possession	100%
Farmland let on tenancy starting on/after 1 Sep 1995	100%
Right to obtain vacant possession within 24 months	100%
Farmland let on tenancy starting before 1 Sep 1995	50%

What Property Qualifies?

Agricultural property for APR purposes includes:^[2]

Agricultural land: arable, pasture, grazing land
Woodland occupied with and ancillary to agricultural land
Farm buildings: barns, grain stores, milking parlours, silage clamps
Farmhouses of a character appropriate to the agricultural property
Cottages occupied by farm workers
Stud farms used for breeding and rearing horses

Agricultural Value vs Market Value

APR only applies to the agricultural value of the property — broadly, what it would be worth if it could only ever be used for agriculture. If the land has additional value (e.g. development potential, equestrian use, or amenity value), that excess is not covered by APR.^[2]

Tip: If the non-agricultural element of a farm business qualifies for Business Property Relief (BPR), BPR can be claimed on the excess value. For example, if land is worth £15,000/acre but its agricultural value is £10,000/acre, APR covers the £10,000 and BPR may cover the remaining £5,000.

Ownership and Occupation Conditions

To qualify for APR:^[2]

Owner-occupied: The transferor must have occupied the land for agricultural purposes for at least 2 years before the transfer
Tenanted: If the land is let to a tenant, the transferor must have owned it for at least 7 years before the transfer

April 2026 Changes

The Autumn Budget 2024 announced major changes to APR from 6 April 2026:^[3]

The first £1 million of combined APR and BPR qualifying assets receives 100% relief
Above £1 million, relief is reduced to 50% (effective IHT rate: 20%)
The £1 million allowance is shared between APR and BPR assets
The allowance is per person and is not transferable between spouses

Impact on family farms: A farm worth £3 million at agricultural value with 100% APR currently pays £0 IHT. Under the new rules: first £1m at 100% relief (IHT: £0), next £2m at 50% relief (taxable: £1m). After the NRB (£325,000): IHT = £675,000 × 40% = £270,000. Payment by instalments over 10 years will be available.

The Farmhouse Test

Farmhouses are a frequent area of dispute with HMRC. The farmhouse must be:^[2]

Of a character appropriate to the agricultural property
Proportionate in size to the land farmed
Used for the purpose of agriculture (i.e. the farmer actually lives there and farms the land)

A large country house on a small acreage, or a house occupied by a retired farmer who has let the land, may not qualify.

Frequently Asked Questions

What property qualifies for APR?

APR applies to agricultural property including: farmland, pasture, woodland occupied with agricultural land, farm buildings (barns, milking parlours, grain stores), farmhouses “character appropriate” to the agricultural property, and stud farms. The land must be used for agricultural purposes.

Does the farmhouse qualify for APR?

A farmhouse qualifies for APR if it is of a character appropriate to the agricultural property. HMRC considers the size of the farmhouse relative to the farm, its proximity to the farmland, and the extent to which it is used for agricultural purposes. Luxury homes on small acreages may not qualify.

How do the April 2026 changes affect farmers?

From April 2026, the combined £1 million threshold means larger farms will face IHT on the agricultural value above £1 million, at an effective rate of 20% (50% relief, taxed at 40%). The £325,000 NRB still applies on top. This is a significant change for family farms worth more than approximately £1.3 million.

Sources

Agricultural relief for Inheritance Tax — GOV.UK
IHTM24000 – Agricultural property relief — HMRC
Autumn Budget 2024: IHT reforms for agricultural and business property — GOV.UK