Agricultural Property Relief: What Changing Rules Mean for Farming Families

Agricultural property relief (APR) has long sat at the heart of succession planning for farming families. For decades, it allowed agricultural land, buildings and associated assets to pass between generations with little or no inheritance tax, helping farms remain intact rather than being broken up to meet tax liabilities ^[1]. As a result, many families came to see APR as a permanent fixture of the landscape, something that worked quietly in the background and rarely needed revisiting.

That sense of certainty has now shifted. While recent lobbying has softened the government’s original proposals, APR can no longer be treated as a passive or automatic protection. Instead, it requires a more deliberate understanding of asset values, ownership structures and long-term planning. The relief still exists and remains valuable, but families are being asked to engage with it in a way they have not needed to for decades.

To explore what these changes mean in practice, we spoke with Tom Lawson, Portfolio Manager at W1M Wealth & Investment Management, whose work focuses on complex rural estates and long-term intergenerational planning.

What APR Covers and What It No Longer Quietly Ignores

APR is often spoken about as a single, standalone relief, but in reality it operates alongside business property relief (BPR), and the distinction between the two is increasingly important. Together, they form the backbone of inheritance planning for most farming businesses ^[2].

“As you’d expect, APR covers agricultural land and farm buildings,” Tom explains. “But in a farming context, we can also bring in business property relief, which can apply to machinery, livestock and certain diversification activities like farm shops or holiday lets.”

It is this combined framework that determines how much of a farm’s overall value can pass between generations without triggering inheritance tax. Under the revised proposals, which are due to take effect from April 2026, the government will introduce a cap on the total value of qualifying assets that can pass free of inheritance tax. Following recent amendments, that cap now stands at £2.5 million per individual, and importantly, it can be transferred between spouses.

“In practical terms,” Tom says, “for a typical family farm, assets up to around £5 million could pass free of inheritance tax. Anything above that level is taxed at an effective rate of 20%, rather than the usual 40%.”

The Thresholds Have Moved, But the Pressure Hasn’t Disappeared

At first glance, the revised thresholds appear generous, and in many cases they will protect smaller farms from any immediate tax exposure. However, Tom is clear that this does not remove the challenge for a significant number of working agricultural businesses.

“Agricultural businesses are often very asset-rich but quite cash-poor,” he explains ^[3]. “So even a reduced inheritance tax bill can feel very significant if it hasn’t been planned for.”

A farming estate valued at £7 million, for example, could now face an inheritance tax bill of around £400,000. While current rules allow that bill to be paid over ten years, interest-free, the ongoing burden should not be underestimated.

“That still means finding around £40,000 a year from a business where cash flow is often tight,” Tom notes. “For a lot of families, that would come as a real shock.”

What makes this particularly difficult is that many farming families have never had to think in these terms before. Assets have passed from one generation to the next without anyone needing to ask uncomfortable questions about value, liquidity or tax.

A Farm Is a Business That Can’t Be Broken Up

Succession planning for farms brings challenges that are rarely present in other estates. A farm is not simply a collection of valuable assets; it is a single, interdependent business. Land, buildings, machinery, agreements and people all rely on each other to function effectively ^[4].

“These are treasured assets that realistically need to be kept together,” Tom explains. “You can’t carve up a farm and expect it to continue operating in the same way.”

Unlike residential property or financial investments, fragmenting ownership or forcing sales to meet tax liabilities can undermine the commercial viability of the entire enterprise. This makes forward planning not just sensible, but essential.

Before You Plan for Tax, You Have to Understand Ownership

When asked where families should begin, Tom is unequivocal that the starting point is not tax mitigation strategies, but understanding ownership in detail.

“The most useful place to start is getting a really firm grip on who owns what,” he says. “It sounds simple, but over time and over generations, it often becomes very complicated.”

Land and assets may be spread across individuals, farming partnerships, companies or trusts, with some family members actively involved in running the business and others entirely removed from day-to-day operations.

“Without that clarity,” Tom explains, “you don’t really know the size of each person’s estate, who might ultimately face a tax bill, or even who would be expected to pay it.”

The Conversations That Decide More Than the Numbers

While technical planning tools are available, Tom believes the greatest risk lies not in the rules themselves, but in how families respond to them.

“The biggest danger at the moment is thinking this is all going to go away,” he says. “There’s been a lot of lobbying and the outcome is better than it was, but the government does seem determined to implement these changes.” ^[5]

Just as important are the human conversations that many families delay because they are uncomfortable or emotionally charged. Decisions about involvement, responsibility and future control often prove harder than addressing the financial implications.

“These conversations go well beyond financial planning,” Tom explains. “They’re about family dynamics, responsibility and long-term stewardship.”

The Window for Action Is Narrower Than Many Realise

Despite the challenges, Tom is clear that families are not without options. Gifting, trusts and life insurance can all play a role in managing inheritance tax exposure, provided they are used thoughtfully and in the right order.

However, many of these strategies depend on time. You must survive 7 years following a gift of over £3,000 for it to be completely free from inheritance tax, and delayed action can sharply limit what is achievable.

“Hearing about this late, and with implementation happening relatively quickly, does still present challenges,” Tom acknowledges. “Which is why starting sooner rather than later is so important.”

APR Still Protects Farms: Just Not by Default

The revised APR regime is unquestionably less punitive than originally proposed, and many smaller farms are likely to remain unaffected. The relief still plays a vital role in protecting working agricultural businesses and supporting long-term stewardship.

What has changed is the need for engagement.

Families can no longer assume APR will simply take care of itself. Understanding ownership, questioning assumptions that may have gone unchallenged for decades, and starting clear, honest conversations are now essential steps in ensuring farms remain viable for the next generation, not just from a tax perspective, but as functioning businesses with a future.