There has been a great deal of publicity about changes to Agricultural Property Relief (APR) and you may have been wondering what it all means. In this article, we will be breaking it down into simple terms so we can all understand how these changes might affect farmers and their families.
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What is Agricultural Property Relief?
Agricultural Property Relief is a type of Inheritance Tax (IHT) relief that helps us pass on farms to the next generation without a hefty tax bill. Essentially, it reduces the amount of IHT payable when agricultural property is transferred, either during the lifetime or upon the death of a farmer
How Does APR Work?
Under the current rules, if you meet certain conditions, you can get up to 100% relief on the agricultural value of your property. This means that if your farm qualifies, it can be passed on to your heirs without any IHT, or with a significantly reduced tax bill. The relief applies to various types of agricultural property, including:
- Agricultural land or pasture
- Woodlands occupied with agricultural land
- Buildings used for rearing livestock or fish
- Farmhouses and cottages that are part of the farm
What’s Changing?
However, there are a number of changes announced in the Autumn Budget 2024. These changes are set to come into effect from 6 April 2026, and they could have a significant impact on many farmers and their families.
- Relief Cap: The biggest change is the introduction of a cap on the amount of relief available. From April 2026, the 100% relief will only apply to the first £1 million of the agricultural value of your property. If your farm is worth more than £1 million, the excess value will only get 50% relief, and the rest will be subject to IHT at a rate of 20%
- Combined Allowance: The £1 million cap applies to the combined value of agricultural and business property. This means if you have business assets that also qualify for Business Property Relief (BPR), they will count towards the £1 million limit
- Non-Transferable Allowance: The £1 million allowance is not transferable between spouses or civil partners. Each person has their own £1 million limit, and careful planning will be needed to make sure no allowance is wasted
What Does This Mean for Farmers?
These changes mean that many farmers will need to rethink their estate planning. If your farm is worth more than £1 million, you could be facing a significant IHT bill when you pass it on to your heirs. Here’s an example to illustrate the impact:
Let’s say your farm is valued at £4 million. Under the new rules, the first £1 million would be exempt from IHT. Of the remaining £3 million, 50% would be exempt, leaving £1.5 million subject to IHT at 20%. This means your heirs would face a tax bill of £300,000
What Should We Do?
Given these changes, it’s more important than ever to plan ahead. Here are a few steps you might consider:
- Review Your Estate Plan: Make sure your current estate plan takes the new rules into account. This might involve updating your will or setting up trusts to help manage the tax burden.
- Consider Gifting: If you’re in a position to do so, you might consider gifting some of your property during your lifetime. This can help reduce the value of your estate and potentially lower the IHT bill.
- Seek Professional Advice: This is a complex area, and it’s worth getting professional advice to make sure you’re making the best decisions for your situation. At Blackstone Solicitors, we’re here to help you navigate these changes and find the best solutions for your family and your farm.
Conclusion
The changes to Agricultural Property Relief are significant, and they could have a big impact on many farming families. By understanding the new rules and planning ahead, we can work towards ensuring your farms stay in the family and continue to thrive for generations to come.
If you have any questions or need help with your estate planning, don’t hesitate to get in touch with us at Blackstone Solicitors. We’re here to support you every step of the way.
We have a proven track-record of advising upon all aspects of private client work. We will guide you through the process and ensure all checks are carried out swiftly and efficiently and we firmly believe that with the right solicitors by your side, the entire process will seem more manageable and far less daunting.to incorporate, what kind of ownership
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Disclaimer: This article provides general information only and does not constitute legal advice on any individual circumstances.
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