Inheriting a Farm in England and Wales: APR, Succession Planning and Wills

Passing a farm to the next generation is one of the most complex areas of inheritance planning in England and Wales. A farm is typically the family’s most valuable asset — often worth millions of pounds — yet it generates comparatively modest income. Selling land to pay an inheritance tax bill can destroy the very business that was meant to be inherited.

This guide explains how agricultural property relief (APR) and the October 2024 Budget changes affect farm succession, how to structure a will to protect a farming estate, and what options exist when APR does not cover the full value of the land.

What is agricultural property relief?

APR is an HMRC relief that reduces the value of qualifying agricultural property when calculating inheritance tax. Before the 2024 Budget changes, APR could reduce the agricultural value of eligible land and buildings by 100% — meaning no IHT was payable on the qualifying agricultural element, regardless of size.

The relief applies to the agricultural value of the property — the value the land would have if it were permanently restricted to agricultural use. If land has development potential, that additional value is not covered by APR; it may qualify for business property relief (BPR) instead, depending on the trading structure.

To qualify, the agricultural property must have been:

• Occupied for agricultural purposes by the owner for at least two years before the transfer (owner-occupied farms); or
• Owned for at least seven years and occupied by someone else for agricultural purposes throughout that period (let farms).

Farmhouses qualify for APR if they are of a character appropriate to the farm and are occupied by someone who farms the land. A large country house that happens to have some farmland attached does not automatically qualify.

The October 2024 Budget: APR cap from April 2026

The Autumn 2024 Budget announced that from 6 April 2026, the combined value of assets qualifying for 100% APR and 100% BPR will be capped at £1 million per person. Value above that cap will attract IHT at an effective rate of 20% (half the normal 40% rate). This is a fundamental change for larger farming estates.

Crucially, the £1 million cap is a combined allowance for APR and BPR together — it is not in addition to the nil-rate band (£325,000) and residence nil-rate band (£175,000), which still apply separately to non-agricultural assets.

These figures assume the full £1m APR/BPR allowance is available and no other chargeable assets are in the estate. Actual IHT may be lower if the NRB and RNRB apply.

Using a will to pass a farm

A well-drafted will is the foundation of farm succession planning. Key decisions include:

Who inherits the farm?

Leaving the farm to a single child who actively farms it, while leaving other assets to other beneficiaries, can preserve both the APR relief and the farming operation. Dividing the farm equally between several children who cannot all farm it often forces a sale.

Equalisation provisions

Where a farming child inherits the farm and other children inherit lesser assets, the will can include a charge on the property — the farming child gradually pays out siblings over time. This avoids a forced sale while treating beneficiaries equitably.

Discretionary trusts

Some testators place the farm into a discretionary trust rather than leaving it outright. This gives trustees flexibility to respond to changing family circumstances — for example, if the intended farming successor dies or becomes unable to farm. However, discretionary trusts are subject to the relevant property regime for IHT (periodic and exit charges), so the APR and BPR reliefs available on the initial transfer do not insulate the trust from ongoing charges.

Specific gifts vs residue

It is usually cleaner to leave the farm as a specific gift to the named beneficiary, rather than as part of residue. This avoids arguments about valuation and prevents the farm being used to satisfy general debts of the estate if it falls into residue.

Let farms and tenanted land

Land let on a Farm Business Tenancy (FBT) under the Agricultural Tenancies Act 1995 qualifies for APR (at the seven-year ownership threshold) but is valued at a discount to vacant possession value — typically 25–50% lower. Let land also generally qualifies for BPR if it forms part of a farming business carried on by the landlord.

Older Agricultural Holdings Act 1986 tenancies carry greater security of tenure for tenants; the landlord’s interest in such land may have a lower vacant possession value and therefore a lower IHT exposure even before reliefs.

Lifetime planning options

For larger estates where APR alone will no longer cover the full IHT liability from April 2026, several lifetime strategies are worth considering with a specialist adviser:

• Transferring land to the farming successor during lifetime. A gift of agricultural land is a potentially exempt transfer (PET). If the donor survives seven years, it falls out of the estate entirely — subject to APR/BPR at the time of the gift if the donor dies within seven years.
• Farming partnerships and companies. Structuring the farming business as a partnership or trading company may allow BPR on the business value (where APR does not reach) and can facilitate gradual transfer of ownership to the next generation.
• Agricultural property: joint ownership with the farming successor.Placing land into joint names can reduce the value in a single estate, but HMRC scrutinises arrangements that appear to lack genuine substance.
• Life insurance to cover the IHT liability. A whole-of-life policy written in trust can provide a lump sum on death to pay IHT without disrupting the farming operation. The policy proceeds are outside the estate if written in trust.

Intestacy and farms

If a farmer dies without a will, the intestacy rules apply. These divide the estate mechanically — typically between a surviving spouse and children — with no regard for who is actively farming the land. In a family where one child works the farm and others have urban careers, intestacy can force a compulsory partition or sale that no one wanted.

Every farmer should have an up-to-date will that reflects their succession wishes. This is especially urgent after the 2024 Budget changes, as the interaction between APR, BPR, the nil-rate band, and the residence nil-rate band requires careful structuring.

Summary

• APR reduces the agricultural value of qualifying farmland and buildings for IHT, subject to ownership and occupation conditions.
• From 6 April 2026, the combined APR/BPR allowance is capped at £1 million per person; excess value is taxed at an effective 20% rate.
• A will is essential — intestacy rules divide the estate mechanically and can force a farm sale.
• Key will-planning decisions include who inherits, how co-beneficiaries are equalised, and whether a trust structure is appropriate.
• Larger estates should also consider lifetime transfers, business structures, and life insurance to manage the post-2026 IHT exposure.