Jan 26
2 min read
Recent changes to Agricultural Property Relief (APR) have introduced a £2.5 million 100% allowance per individual, now transferable between spouses with the remaining relief at 50%. A farming family with a combined estate valued at £6 million, would receive £5.5 million of agricultural property relief. Whilst a welcome buffer, it still leaves a significant portion of the estate exposed to IHT at 40%. As such this highlights the importance of careful estate planning.
The transferable allowance between spouses provides some flexibility, but it also places greater emphasis on accurate classification of assets. Farming enterprises typically comprise both agricultural and non-agricultural elements, such as rental properties. Only qualifying agricultural assets benefit from APR. Families must ensure that their accounts clearly distinguish between farming operations and non-farming activities. Without this separation, HMRC may challenge claims, potentially reducing relief and increasing the tax burden.
The recent 2% increase in income tax on rental profits adds further complexity. Costs relating to rental enterprises, such as maintenance, insurance, and management fees must be correctly recharged to the rental enterprise rather than absorbed by the farming business. Failure to do so risks overstating rental profits and understating farming profits, which could distort both tax liabilities and APR eligibility.
When undertaking estate planning, you must consider how APR interacts with other reliefs, such as the nil‑rate band and business property relief. In short, proactive planning remains the cornerstone of effective IHT management for farming families.
Robert Black
Black Acre Rural Limited
07595 662661