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Legal News | 29.06.23

Old MacDonald had a farm…(but did he have to pay inheritance tax?).

Calculating and paying tax when someone passes on assets is a private client lawyer’s bread and butter but is Agricultural Relief still a useful and relied upon tool for saving inheritance tax (IHT)?

What qualifies for Agricultural Relief from IHT?

Agricultural Relief may be available for land and farm buildings that are used to grow crops or rear animals (but not normally horses).  A key factor is that the agricultural property must have been used for the purposes of farming, either by the owner-occupier for at least 2 years or for 7+ years if occupied e.g. by a tenant farmer.

Agricultural Relief and Business Relief

Agricultural Relief from IHT will only cover the agricultural value of the land and buildings.  The actual market value may be higher and, if so, the difference could be subject to a 40% IHT charge.

However, if you are actively farming, then in addition to Agricultural Relief, Business Relief may also apply and could cover the difference between the agricultural value and market value.

This is a complex area and advice will be needed on the structure of your farming activities. If you require further information, please get in touch with your usual contact at Wansbroughs or email  wealth@wansbroughs.com.



Posted By Our Wills, Tax, Trusts & Probate Team