For many in the farming and agricultural sectors, a viable succession plan for your business might include passing on assets to a family member.
As such you may be looking to plan for Inheritance Tax (IHT), particularly on the value of your business assets which you have spent time and effort building.
The Chancellor’s recent Spring Budget has introduced some key changes to how a particular relief, Agricultural Property Relief (APR), is applied to certain agricultural assets.
What is Agricultural Property Relief
Agricultural Property Relief is a type of Inheritance Tax relief on agricultural property passed on either during your lifetime or in your Will.
Agricultural property that qualifies for Agricultural Property Relief is land or pasture used to grow crops or rear animals. It can include:
- 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
- The value of milk quota associated with the land
- Some agricultural shares and security
- Farm buildings, farm cottages and farmhouses
However, certain things do not qualify for APR, including:
- Farm equipment and machinery
- Derelict buildings
- Harvested crops
- Livestock
Are there other requirements?
There are other conditions you must meet to be eligible for APR.
The property must be located in the UK, the Channel Islands, the Isle of Man or the European Economic Area (EEA).
Additionally, the property must have been owned and occupied for agricultural purposes immediately before it was transferred for at least two years if occupied by the owner of their spouse, or seven years if occupied by someone else.
Relief is generally due at 100 per cent if these conditions are met and the land was either:
- Farmed by the person who owned it
- Farmed by someone else on a short-term grazing licence or let on a tenancy that began on or after 1 September 1995
What is changing?
As announced by the Chancellor in his Spring Budget, lands under environmental agreements will also be eligible for Agricultural Property Relief (APR) from 6 April 2025.
Whether you are part of the Environmental Land Management scheme in England or involved in any similar green initiative, you will be covered by the benefits of APR from this date.
Under APR, you can pass on some agricultural property free of Inheritance Tax, either during your lifetime or as part of your Will.
It doesn’t matter if your land was actively farmed or previously qualified for APR. If it’s been tagged as ‘agricultural land’ for the past two years, you’re set to take advantage of this change.
Succession Planning
Succession planning can seem daunting, but it’s essential for securing your legacy and ensuring a smooth transition for your successor.
If you haven’t started your succession planning, we’re here to help you make the best decisions for you and your family.
As the largest independent firm in Herefordshire and serving rural businesses for over 75 years, we know what support farmers want from their accountant.
Our services include providing specialist advice tailored to your unique needs; assistance with wills and estate planning; Inheritance Tax; cash flow management; partnership accounts and strategic decision-making.
Planning ahead is crucial.
Contact us today to book a FREE 30-minute business review by emailing Kevin Tong at kevin.tong@thornewidgery.co.uk or call us at 01432 276393.
