Key takeaways
- Agricultural Property Relief (APR) reduces the agricultural value of farmland, farmhouses and buildings for Inheritance Tax at 100% or 50%.
- From 6 April 2026, 100% relief applies to the first £2.5 million of combined agricultural and business property, with 50% relief above.
- You must have farmed the land yourself for two years, or owned it for seven years while someone else farmed it.
- APR only covers agricultural value; any extra value, such as development potential, may qualify for Business Property Relief instead.
- Unused allowance passes to a surviving spouse or civil partner, and tax due can be paid over 10 years interest-free.
Agricultural Property Relief (APR) has long allowed farming families to pass on land without Inheritance Tax (IHT). Since 6 April 2026, full relief is capped by a £2.5 million allowance shared with Business Property Relief, which makes careful planning more important for larger farms.
What qualifies
APR applies to the agricultural value of agricultural property in the UK, Channel Islands or Isle of Man, including:
- land or pasture used to grow crops or rear animals intensively
- farm buildings and cottages of a character appropriate to the land
- the farmhouse, if it is of a character appropriate to the farm and occupied for agricultural purposes
- woodland and buildings used for intensive livestock or fish rearing, if occupied with agricultural land
- land in some environmental and habitat schemes
Ownership and occupation tests
The property must have been:
- occupied by you for agricultural purposes for two years before death or the gift, or
- owned by you for seven years and occupied by someone (such as a tenant farmer) for agricultural purposes throughout
The rate of relief
| Situation | Relief (within the allowance) |
|---|---|
| You farm the land, or have vacant possession within 24 months | 100% |
| Land let on a tenancy starting on or after 1 September 1995 | 100% |
| Older tenancies (before September 1995), in most cases | 50% |
The £2.5 million allowance from April 2026
From 6 April 2026:
- 100% relief applies to the first £2.5 million of property qualifying for 100% APR or 100% BPR, combined
- relief on qualifying value above the allowance is 50%, giving an effective IHT rate of 20%
- any unused allowance can be transferred to a surviving spouse or civil partner, so a couple can pass on up to £5 million with full relief
- a separate £2.5 million allowance applies to agricultural and business property in trusts
- IHT on qualifying property can be paid in 10 equal annual instalments, interest-free
Example
Margaret dies in 2026/27 owning farmland with an agricultural value of £3.5 million, which she has farmed for decades. She never married, so she has no transferred allowance.
| Amount | |
|---|---|
| Agricultural value | £3,500,000 |
| 100% relief on first £2.5 million | (£2,500,000) |
| 50% relief on remaining £1 million | (£500,000) |
| Value chargeable | £500,000 |
The £500,000 is added to the rest of her estate; after her nil-rate band, IHT is due at 40% on anything not covered. Tax attributable to the farmland can be paid over 10 years without interest.
Agricultural value versus market value
APR applies only to the agricultural value: what the land would be worth if it could only ever be used for agriculture. If farmland has hope value for development, the excess over agricultural value does not get APR. If the farm is also a trading business, Business Property Relief may cover the non-agricultural value instead. See Business Property Relief.
Farmhouses
Farmhouses are a frequent area of dispute. HMRC will consider whether the house is of a character appropriate to the farm, whether it is the centre of farming operations, and whether the occupier is actively farming. A large house on a small holding, or occupied by a retired farmer who has let the land, may get no relief.
Planning points
- Review whether both spouses’ wills make use of their allowances.
- Consider lifetime gifts, which may become exempt after seven years; APR on a failed gift requires the recipient to keep the land in agricultural use.
- Make sure the business structure, tenancies and occupation meet the tests, particularly for farmhouses.
- Get formal valuations that separate agricultural value from development value.
See also IHT planning strategies.
Frequently asked questions
What is the Agricultural Property Relief limit from April 2026?
100% relief on the first £2.5 million of combined agricultural and business property, with 50% relief on qualifying value above that.
Can I transfer my APR allowance to my spouse?
Yes. Any unused part of the £2.5 million allowance passes to a surviving spouse or civil partner.
Does APR cover the full market value of my farm?
No. It covers agricultural value only. Development or hope value may need Business Property Relief or will be taxable.
How long must I own farmland for APR?
Two years if you farm it yourself, or seven years if it is farmed by someone else, such as a tenant.
Sources
Rates, thresholds and rules in this guide were checked against HMRC and GOV.UK guidance in October 2026. Tax rules change, so check the current position on GOV.UK or with a qualified adviser before acting. This guide is general information, not personal advice.