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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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:
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:
The following items also don't qualify for 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.
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.