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On 6 April 2026 Agricultural Property Relief changed materially. The first £2.5m of combined APR and BPR qualifying assets still attracts 100% relief, but assets above that allowance receive 50% relief — meaning IHT at an effective rate of 20% on the excess.
This guide focuses on the APR changes specifically. For the parallel changes to Business Property Relief, see our guide to BPR changes from April 2026. For background on the combined picture for farming families, see Farm Inheritance Tax: APR and BPR Explained.
Agricultural Property Relief reduces the value of qualifying agricultural property for IHT purposes. It was designed to allow farms to pass between generations without a forced sale. APR applies to:
Under the rules that applied until 5 April 2026, qualifying agricultural property attracted either 100% APR (if the owner occupied or had been entitled to vacant possession within 12 months) or 50% APR (for let land where the tenancy predates 1 September 1995). There was no upper limit.
Since 6 April 2026, a combined allowance of £2.5m has applied to the total value of assets attracting APR and BPR at the 100% rate. The allowance is per person, and any unused part of it can be transferred to a surviving spouse or civil partner if a claim is made — so a couple can have up to £5m between them. Where the first death was before 6 April 2026, the whole £2.5m allowance is treated as available to transfer. Assets above the allowance receive 50% relief.
The same qualifying conditions continue to apply. What changed is that even qualifying assets attract 100% relief only up to £2.5m in total. Above that, 50% relief applies — the same rate that already applied to assets qualifying for 50% APR. Shares admitted to trading on markets designated as "not listed", such as AIM, attract 50% business relief in all circumstances and do not use up the £2.5m allowance.
Example: Farmer with £4m agricultural estate, dying after 5 April 2026
Under old rules (pre-April 2026):
£4m agricultural estate = 100% APR = fully exempt. Taxable estate: £200,000. Below NRB. IHT = £0.
Under new rules (from April 2026):
First £2.5m agricultural: 100% APR = exempt.
Remaining £1.5m agricultural: 50% APR = £750,000 included in estate.
Total taxable estate: £750,000 + £200,000 = £950,000.
Less NRB: £325,000. Taxable: £625,000 at 40% = £250,000 IHT.
Many farming families have assets qualifying for both APR (farmland, farm buildings) and BPR (farm business, machinery, livestock in some cases). The £2.5m cap applies to the combined total of both reliefs. You cannot use £2.5m of APR plus a further £2.5m of BPR — the cap is shared.
Where an estate holds more than £2.5m of qualifying property, the allowance is applied proportionately across the qualifying assets rather than being allocated to whichever assets the estate chooses.
Example: Farmer-businessman with mixed qualifying assets
HMRC applies the allowance proportionately across the qualifying agricultural and business property, rather than to whichever assets would produce the lowest bill.
APR on farmhouses has always been contentious. HMRC applies strict tests to determine whether a farmhouse qualifies — it must be proportionate in size and character to the farm, and the deceased must have been a working farmer, not a retired farmer or a farming company director without genuine agricultural occupation.
With the allowance in place, the consequences of a farmhouse being denied APR are more severe, because the relief available across the estate is capped in the first place.
Each spouse or civil partner has their own £2.5m allowance, and unused allowance can be transferred to the survivor. A farm worth £5m can therefore pass with the full £5m at 100% relief where both allowances are available. The transfer is not automatic: the personal representatives must claim it, on HMRC form IHT437, within four years of the survivor's death or six months of taking up their role.
See our guide to transferring the nil-rate band between spouses for more on how to structure the first death efficiently.
Gifting qualifying agricultural property starts the 7-year clock running. If the donor survives 7 years, the property falls outside the estate entirely, irrespective of APR. A transitional rule applies to gifts made on or after 30 October 2024: where the donor dies on or after 6 April 2026 and within seven years of the gift, the new allowance and 50% rate apply to that gift.
Gifts of agricultural land may be eligible for CGT holdover relief, allowing the gain to be deferred into the recipient's hands. It must be claimed and is not automatic.
Agricultural property transferred to a discretionary trust can still qualify for APR within the trust, subject to meeting the qualifying conditions. However, discretionary trusts are subject to their own IHT regime — 10-year periodic charges and exit charges. See our guide to IHT on discretionary trusts.
Inheritance tax on property qualifying for agricultural or business relief can be paid in ten equal annual instalments, interest-free, and the reform extended that option to all property eligible for either relief. Separately, a whole-of-life policy written in trust is one arrangement some families use to provide a lump sum on death. See our guide to life insurance in trust.
APR has always been subject to anti-avoidance provisions. Key points:
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