Inheritance Tax Strategy 7 - Use Your “Agricultural Property Relief”

Agricultural Property Relief is usually abbreviated to “APR”.

Agricultural assets are often free of inheritance tax.  The rules are quite complicated, but very broadly:

A. Farmers get 100% APR on farmland and buildings which they farm themselves, if they’ve owned the land for 2 years. (100% relief means no tax to pay at all.)

B. Agricultural landowners usually get 50% APR on land which is tenanted by someone else, if they’ve owned the land for 7 years.

Remember that if you’re a farmer you’re also in business, so Business Property Relief is relevant to you, as well.

There are lots of things I could say about Agricultural Property Relief, but these are the highlights:

1. You only get APR on the “agricultural value” of your land. Agricultural value is what the property would be worth if it were only ever used for farming. For example, imagine you’ve got a farm which would be worth £1million to another farmer, but you’ve actually obtained planning permission to build some houses on it, and you intend to sell it for £2million to a developer for that purpose. The value is £2million, but you only get APR on £1million, and the other £1million is taxable.

2. Just like BPR (see Strategy 6), it is easy to “waste” (rather than “use”) your APR. So, my advice is the same as in the previous strategy, and here it is again in bold type:

DON’T WASTE YOUR “APR” WHEN YOU DIE!!!

             As before, you “use” APR either by passing assets directly to a lower generation or by putting them on a first death discretionary trust, and you “waste” APR by leaving assets outright to a surviving spouse or civil partner.