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  • Agricultural Relief

Agricultural Relief

If you own a farm, it will be included in your estate for Inheritance Tax purposes. However, if it's a working farm, Agricultural Relief may allow you to pass on some or all of the property free of tax, either during your lifetime or as part of your will.

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What qualifies for Agricultural Relief?

For agricultural property to qualify for Agricultural Relief, it must be located in the UK, the Channel Islands, the Isle of Man or the European Economic Area, and it must be part of a working farm.

You must have also owned it for two years before your death. If you have let the property out you must have owned it for seven years before your death.

Agricultural property includes:

  • agricultural land or pasture
  • farmhouses, cottages or buildings that are used for agricultural purposes and are proportionate in size to the nature and size of the farming activity
  • woodland and buildings used for intensive rearing of livestock or fish
  • growing crops transferred with the land
  • stud farms that are breeding and rearing horses, and the land that the horses graze on
  • short-rotation coppice - trees that are planted and harvested at least every ten years
  • land that is actively not being farmed to help preserve the countryside and habitat for wild animals and birds under the Habitat Scheme
  • the value of land where the value includes the benefit of a milk quota
  • some agricultural shares and securities

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What doesn't qualify for Agricultural Relief?

The value of a cottage or farmhouse that has a value higher than its agricultural worth won't qualify. For example, the relief given on a desirable country residence will be calculated on the agricultural value of the land or property used in farming, not the market value of the house.

A cottage or farmhouse that is occupied by someone not employed in farming won't qualify unless the occupier is:

  • a retired farm employee
  • the spouse or civil partner of a deceased farm employee
  • living there under a lease granted as part of their former employment contract
  • a protected tenant with statutory rights

The following items also don't qualify for Agricultural Relief:

  • farm equipment and machinery such as tractors
  • derelict buildings
  • harvested crops
  • livestock

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Rates of Agricultural Relief

If the property qualifies, Agricultural Relief is usually given at 100 per cent. You must deduct any outstanding mortgages on the property before calculating the relief.

If the property was rented out before 1 September 1995, relief may only be given at 50 per cent. There are some situations however where land rented out before 10 March 1981 can qualify for 100 per cent relief.

More about relief for land rented out before 10 March 1981

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Giving away agricultural assets or property

You can give away agricultural assets or property while you're still alive without putting Agricultural Relief at risk, as long as the assets or property qualify for Agricultural Relief in the first place.

If you give away agricultural assets or property in your lifetime, whoever you give them to must keep them as a going concern until you die in order to keep the relief.

They can replace the assets or property with something of the same value if it's for agricultural use.

If you live for seven or more years after making a gift, anything you give away won't be classed as part of your estate for Inheritance Tax purposes. It may be helpful to discuss the implications of giving away agricultural assets or property with a solicitor. You'll find some links below to professional organisations - though not all professionals are registered with them.

Find out about gifts that are exempt from Inheritance Tax

Find a solicitor on the Law Society of England and Wales website (Opens new window)

Find a solicitor on the Law Society of Northern Ireland website (Opens new window)

Find a solicitor on the Law Society of Scotland website (Opens new window)

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More help?

Contact the Probate and Inheritance Tax Helpline

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More useful links

Find out more about Agricultural Relief

What to do if you qualify for both Business Relief and Agricultural Relief

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