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Testators could save up to 100% Inheritance Tax with Agricultural Property Relief

Inheritance Tax is affecting more families than ever before. Many people assume that Inheritance Tax is limited to especially wealthy people. However, the amount of Inheritance Tax collected by HMRC has actually more than doubled since 2009-2010, extending its reach into the lives of ordinary families.

So, given it has the potential to claim up to 40% of your estate after you die, people are becoming smarter with their estate planning, successfully cutting their tax bills by taking advantage of government tax reliefs and exemptions.

One such exemption is Agricultural Property Relief which provides a 50% or 100% reduction on the amount of Inheritance Tax which would normally be payable on the value agricultural property, including farmland and farm buildings.

Agricultural Property Relief in mainly intended to help farmers keep their business and land in the family after they die. However, others can also benefit from the Inheritance Tax relief, including investors who own shares in agricultural property.

Agricultural Property Relief from Inheritance Tax

Agricultural Property Relief is Inheritance Tax relief on the value of farm land or property allowing you to pass on all or some of the value of your agricultural property during your lifetime as a gift or under your Will.

What is agricultural property?

Agricultural property is

  • land used to intensively rear animals
  • Crops growing on the land
  • Equine stud farms for grazing and rearing horses
  • Farm buildings, cottages, and houses (which are in character with the surrounding land and used for agricultural purposes)
  • Woodland when it is ancillary to farmland (for example, ‘shelterbelts’) or is planted and harvested at least every 10 years
  • Unfarmed land under a Habitat Scheme (the preservation of habitats for wild animals and birds)
  • Unfarmed land under a crop rotation scheme
  • Shares and securities in agricultural land
  • The agricultural land’s associated milk quota value

How long do you have to own land to qualify for Agricultural Relief?

To qualify for Agricultural Property Relief, the land must have been owned and occupied up until transfer for:

  • 2 years if the land is occupied by the owner
  • 7 years if the land is occupied by someone else (for example, if you are an investor or you let the land to someone else)

The nature of the occupation must have been for agricultural purposes.

What rates of Inheritance Tax relief are available for agricultural property?

Agricultural Property Relief allows up to 100% Inheritance Tax Relief if:

  • At the time of transfer, you are entitled to vacant possession or you could obtain vacant possession within 12 months;
  • The land was let on a short-term grazing licence; or
  • The land was let on a tenancy beginning on or after 1 September 1995.

In all other situations, relief is available at a rate of 50%.

Do you need estate planning advice about Agricultural Property Relief?

At Harold Benjamin, our Private Client team (Harrow and West End) have in-depth experience assisting clients with Inheritance Tax planning, including providing advice on your tax relief and exemptions options, such as Agricultural Property Relief.

Our clients include people looking to minimise their Inheritance Tax bill in order to leave as much inheritance to their loved ones as possible. We also advise Executors and Administrators on calculating and paying Inheritance Tax as part of the probate process, including claiming for Agricultural Property Relief.

Whatever your personal circumstances, we will provide practical tailored advice designed to suit your needs and achieve the outcome you want as efficiently and cost-effectively as possible.

For further advice and information, get in touch with our Private Client lawyers in Harrow on (020 8422 5678) or West End on (020 7224 0888).

The contents of this article are intended for general information purposes only and shall not be deemed to be, or constitute legal advice. We cannot accept responsibility for any loss as a result of acts or omissions taken in respect of this article.