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 because it is under thean Habitatenvironmental Schemeland management agreement
• land not currently being farmed under a crop rotation scheme
• the value of milk quota associated with the land
• some agricultural shares and securities
• farm buildings, farm cottages and farmhouses

Some agricultural property does not qualify for Agricultural Relief, including:

• farm equipment and machinery
• derelict buildings
• harvested crops
• livestock
• property subject to a binding contract for sale

Mortgaged property

Before calculating the Agricultural Relief, you must deduct any:

• outstanding mortgages on the property
• other secured liabilities on the property

Location

To qualify for relief, a property must be part of a working farm in the UK. It can be owner occupied or let.

If claimed before 6 April 2024, the relief also applies to charges on deaths and other transfers in the:

• 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:

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

Property received by transfer

If the person making the transfer originally inherited the property from someone other than their spouse or civil partner, their period of ownership is calculated from the date of that first death.

If the property was originally acquired through a transfer, the following statements must all be true:

• the property qualified for Agricultural Relief at the date of the first transfer

• the property was occupied for agricultural purposes by either:

  • the person making the later transfer
  • the personal representatives of the person the property originally came from
• the property qualifies for relief, apart from the occupation and ownership tests
• one of the transfers occurred on death

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

Rates of Agricultural Relief

AgriculturalProperty Reliefqualifies isfor dueAgricultural Relief at 100% if:

• the person who owned the land farmed it themselves
• the land was used by someone else on a short-term grazing licence
• it was let on a tenancy that began on or after 1 September 1995

A property owned before 10 March 1981 can qualify for 100% relief if:

• it would have qualified under Schedule 8 Finance Act 1975 if it had been transferred before that date
• the person who owned it had no possible right to vacant possession between that date and the date of the current transfer

On or after 6 April 2026, the combined amount of 100% Agricultural Relief and Business Relief allowed against a person’s estate cannot exceed £2.5 million.

In anyall other case,cases reliefthe rate is due at 50%.

Mortgaged100% propertyrelief allowance

Before100% calculatingrelief allowance on the Agriculturalcombined Relief,value youof mustqualifying deductagricultural or business property is limited to £2.5 million for deaths on and after 6 April 2026. This includes the qualifying property in the estate and any:

• outstandingqualifying mortgagesproperty given away on or after 30 October 2024 if the propertygift was made within seven years of death
• other securedqualifying liabilitiesproperty on(including property in trusts) treated as part of the estate

 Where the total value of qualifying property exceeds £2.5 million, the excess will receive 50% relief.

Transferring unused allowance

Any unused portion of the £2.5 million allowance from a late spouse or civil partner may be transferred to the deceased’s estate, if a claim is made either:

• within 4 years of the survivor’s death
• within 6 months of the personal representatives starting their role

If the first spouse or civil partner died before 6 April 2026, it is assumed the full £2.5 million is transferred to the survivor’s estate on death.

Applying and apportioning the allowance

The 100% relief allowance must be applied in date order, starting with the earliest qualifying lifetime gift from 30 October 2024. Any remaining balance is then shared equally across all qualifying agricultural or business property forming part of the estate on death.

Find out how to apportion Agricultural and Business Relief.

Trusts

The £2.5 million relief allowance also applies to  qualifying agricultural, or business property held in trusts. How the allowance applies depends on the type of trust. Read more about agricultural and business property 100% relief allowance in the Inheritance Tax Manual (IHTM25500).

Agricultural shares and securities

Some company shares and securities are eligible for Agricultural Relief if their value:

• gave the deceased control of the company at the time of death
• comes from agricultural property that forms part of the company’s assets

Find out more about the rules that apply to sales of related property within 3 years after death.

Gifts of agricultural property

If a gift (or portion of a gift) qualified for Agricultural Relief at the time it was made, it will still qualify if it:

• has been held by the person who received it until their own death or that of the person who gave the gift
• is agricultural property that has been occupied for agricultural purposes since the gift was made

If the person receiving the gift dies before the person who gave the gift, conditions for relief have to be met:

• on the date that the gift is given
• at the time of their death

If the person receiving a gift sells it, before the death of the person giving the gift, to a company in exchange for shares in that company then those shares are treated as the original property.

Any additional shares received as a result of a re-organisation or take-over-bid are treated as part of the original gift.

Replacement agricultural property

Conditions must be met if:

• property which qualified for relief is replaced by other property that also qualifies for relief (apart from the minimum period of ownership requirement)
• the original property was gifted

These conditions are:

• all of the sale proceeds are used to buy the replacement property
• the sale and purchase are an ‘arms length transaction’ — the buyers and sellers act independently and have no relationship to each other
• the sale and purchase take place within 3 years of each other

When combined, the original and replacement properties must meet the conditions shown under ‘Gifts of agricultural property’.

If the agricultural property was in a person’s estate when they died and it had replaced other agricultural property, it may still qualify for Agricultural Relief if the original and replacement property:

• was occupied by the owner, for the purposes of agriculture, for a total period of at least 2 years during the 5 years before the death
• was owned and occupied (either by the owner or someone else) for the purposes of agriculture for at least 7 years during the 10 years before the death

Relief is limited to what would have been available before the replacement.

If the property was sold at less than the market value, relief is limited by the proportion that was given as a gift.

Example

John sells a field on his farm to his son David for £500. The field is worth £2,000. This means that John is giving David a gift of 75% of the value of the field (£1,500).

David sells the field for £2,000 a year later. He uses all the money from the sale to buy another field.

John dies 3 years after the sale.

When calculating Inheritance Tax, the value of the gift made by John is the original market value of the field (£2,000), less the £500 paid by David (the value that was transferred). The resulting sum of £1,500 is eligible for Agricultural Relief.

Business relief

You cannot claim Business Relief on the value of an asset that you have already claimed Agricultural Relief on.

You may be able to claim Business Relief on the value of an asset not fully covered by Agricultural Relief if:

• you are a farming business
• the conditions of Business Relief are met