What is deemed to be Agricultural Property?

You can pass on some agricultural property free of Inheritance Tax, either during your lifetime or as part of your will.

Agricultural property that qualifies for Agricultural Relief is land or pasture that is used to grow crops or to rear animals. It also includes:

$

Growing crops

$

Stud farms for breeding and rearing horses and grazing

$

Trees that are planted and harvested at least every 10 years (short-rotation coppice)

$

Land not currently being farmed under the Habitat Scheme

$

Land not currently being farmed under a crop rotation scheme

$

Some agricultural shares and securities

$

Farm buildings, farm cottages and farmhouses

The following do not qualify for Agricultural Relief:



Farm equipment and machinery



Derelict buildings



Harvested crops



Livestock



Property subject to a binding contract for sale

Rates of Agricultural Relief

Agricultural Relief is due at 100% if:

Z

The person who owned the land farmed it themselves

Z

The land was used by someone else on a short-term grazing licence

Z

It was let on a tenancy that began on or after 1st September 1995

There are different qualifying criteria for properties that were owned before 10th March 1981 to gain 100% Agricultural Relief.

Relief is due at a lower rate of 50% in any other case.

Location

A property may be owner occupied or let, but it must be part of a working farm in the:

$

United Kingdom

$

Channel Islands

$

Isle of Man

$

European Economic Area

Period of Ownership or Occupation

The property must have been owned and occupied for agricultural purposes immediately before its transfer for:

Z

2 years if occupied by the owner, a company controlled by them, or their spouse or civil partner

Z

7 years if occupied by someone else

Farmhouses and Cottages

Buildings must be of a nature and size appropriate to the farming activity that is taking place. The property is valued as if it could only be used for agricultural purposes. Any value over and above this ‘agricultural value’, such as the market price of a country residence, does not qualify for Agricultural Relief.

A cottage or farmhouse must be occupied by someone employed in farming or:

$

A retired farm employee

$

The spouse or civil partner of a deceased farm employee

They must occupy the property as either a:

$

Tenant under a lease granted as part of their former employment contract

$

Protected tenant with statutory rights

Business Property Relief

You cannot claim Business Property Relief on the value of an asset that you have already claimed Agricultural Relief on. However, a farming business may find that Business Property Relief is available on the value of an asset not fully covered by Agricultural Relief, if the conditions are met.

Please note:
The Financial Conduct Authority does not regulate Inheritance Tax planning.

Tax treatment varies according to individual circumstances and is subject to change.

Estate Planning is not regulated by the Financial Conduct Authority.

Sources:
https://www.gov.uk/guidance/agricultural-relief-on-inheritance-tax

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