RIP British Farming? - What is agricultural property anyway?

Today, the Environment, Food and Rural Affairs Committee (“EFRA”) held the first meeting of its inquiry on ‘The future of farming’. This inquiry will, over the next two years, consider the impact of recent rural policy decisions on the agrarian economy and Britain’s food security. Today’s session focussed on potential impacts of Labour’s proposed changes to Agricultural Property Relief (“APR”) and Business Property Relief (“BPR”). In this article, Nicholas Thompson, a Trainee Solicitor in our Private Client Team, explains the types of land benefiting from APR

In response to the start of EFRA’s inquiry, farmers, organised by Save British Farming and Kent Fairness for Farmers, met outside Downing Street to express their opposition to proposed changes announced in the Autumn Budget. Farmers engaged in a range of activities from a peaceful protest on Whitehall to a series of tractor rallies including around one hundred tractors in York and it would seem more than one thousand tractors setting out from Trafalgar Square, circling our office in Westminster, and driving back to Parliament Square – a marvellous sight and sound as we heard tractor-horn renditions of ‘Baby Shark’, ‘The Wheels on the Bus’, the ‘William Tell Overture’, and ‘Old MacDonald Had a Farm’ amongst many others!

APR summary

APR is a 50% or 100% relief on inheritance tax (“IHT”) in relation to agricultural property. For a summary of proposed changes to APR and its companion relief, BPR, please see our November article (available here). Draft legislation has not yet been released but a nine-page summary of the proposed changes effective 26 April 2026, published by His Majesty’s Treasury, does not suggest that the definition of agricultural property will be significantly altered.

Some finer points on applying APR

In relation to the above, it is important to note that any land benefiting from APR on charges on deaths or transfers which occurred after 6 April 2024 must form part of the United Kingdom, exclusive of the Channel Islands, Isle of Man, and the European Economic Area. Owner occupiers must hold land for a minimum of two years to qualify for the relief. If the land is occupied by someone other than the owner, it must be held by the owner for a minimum of seven years.

In order to assist with calculating the period of ownership for APR, we provide the below table:

For property originally acquired by transfer, the following conditions must be satisfied:

1. The property qualified for APR at the date of the first transfer;
2. The property was occupied for agricultural purposes by either:
   1. The person making the later transfer; or
   2. The personal representatives of the person the property originally came from;
3. The property qualifies for APR, apart from the occupation and ownership tests; and
4. One of the transfers occurred on death.

When valuing agricultural property, one should note that all land is valued for APR purposes at the ‘agricultural value’ which assumes that the land is subject to a restriction for solely agricultural usage (whether or not such a restriction is in place). Any additional market value in the land above the ‘agricultural value’ may be subject to IHT at the standard rate.

Types of Land benefitting from APR

Agricultural property refers solely to land or pasture used to grow crops or rear animals. The government provides the following list, to which we provide comments in italics:

1. Land used for growing crops; - This is a straightforward type of land which is clearly agricultural in nature.
2. Stud farms used for breeding and rearing horses and for grazing; - This type of land is similarly agricultural in nature as long as they are genuinely involved with the horse stud economy. This does not include land grazed by horses for non-agricultural purposes.
3. Trees which are planted and harvested at least every ten years (also referred to as ‘short-rotation coppice’); - This is typically land planted with poplar and willow to produce biomass pellets and includes land benefiting from the Department for the Environment, Food and Rural Affairs’ (“DEFRA”) Energy Crop Scheme.
4. Land not currently being farmed under the Habitat Scheme; - This includes a wide variety of land types under various government schemes which seek to preserve the nature of the countryside and to maintain a habitat for wild animals and birds. We are happy to advise on the specific schemes which may be relevant to you should you require this tailored advice.
5. Land not currently being farmed under a crop rotation scheme; - Crop rotation has been a vital and widely-used method in British agriculture for millennia and such land is rightly considered agricultural in nature.
6. The value of milk quota associated with the land; - This stems from the dissolution of the Milk Marketing Boards and the adoption of Council Regulation (EEC) 3950/92 as of 1 April 1994 under the Dairy Produce Quotas Regulations 1994. These changes permitted the transfer of milk quota without the land. This means the quota of milk associated with land is now considered property distinct from the land itself as the two assets may have different owners. The land also benefits from the relief.
7. Some agricultural shares and securities;– This is typically where agricultural land is held in a limited company over which the owner has control and where the value in the shares stemmed from the agricultural value of the land held by the company.
8. Farm buildings, farm cottages, and farmhouses. – This is for land which is involved in agricultural activities and does not relate to homes which historically were farm cottages or farmhouses. As above, the value qualifying for APR will be ‘agricultural value’. The occupier of this type of land must be someone employed in farming, a retired farm employee, or the spouse or civil partner of a deceased farm employee. The occupation must be by way of a lease granted under an employment contract or as a protected tenant with statutory rights.

The following property is noted in government documents as explicitly not qualifying for APR:

1. Farm equipment and machinery;
2. Derelict buildings;
3. Harvested crops
4. Livestock; and
5. Property subject to a binding contract of sale.

It is, however, worth noting that the above assets which do not qualify for APR may qualify for BPR if the requirements for that relief are met.

If this affects you or your family we would be happy to assist with legal advice regarding reliefs currently available and estate planning measures which might be taken now. We can advise anyone who may need to update their existing Will, or make one for the first time, in order to ensure their estate planning is up to date. A professionally drawn Will alongside an estate planning strategy, both updated at regular intervals, is always advisable to minimise the risk of falling foul of changes to legislation.

Please contact Catherine Pugsley or Nicholas Thompson on 0207 222 5381 to discuss this further.