Agricultural Relief for Inheritance Tax

Work out whether assets in an estate qualify for Agricultural Relief and the rate at which it is due.

Agricultural property

You can pass on some agricultural property free of Inheritance Tax, either during your lifetime or as part of your will.

Agricultural property that qualifies for Agricultural Relief is land or pasture that is used to grow crops or to rear animals intensively. It also includes:

  • growing crops
  • stud farms for breeding and rearing horses and grazing
  • trees that are planted and harvested at least every 10 years (short-rotation coppice)
  • land not currently being farmed under the Habitat Scheme
  • land not currently being farmed under a crop rotation scheme
  • the value of milk quota associated with the land
  • some agricultural shares and securities
  • farm buildings, farm cottages and farmhouses

These do not qualify for Agricultural Relief:

  • farm equipment and machinery
  • derelict buildings
  • harvested crops
  • livestock
  • property subject to a binding contract for sale


A property may be owner occupied or let, but it must be part of a working farm in the:

  • UK
  • Channel Islands
  • Isle of Man
  • European Economic Area

Period of ownership or occupation

The property must have been owned and occupied for agricultural purposes immediately before its transfer for:

  • 2 years if occupied by the owner, a company controlled by them, or their spouse or civil partner
  • 7 years if occupied by someone else

Property received by transfer

When the person making the transfer originally inherited the property from someone other than a spouse or civil partner, the period of ownership is calculated from the date of that first death.

If the property was originally acquired through a transfer, these conditions must also be met:

  • the property must have qualified for Agricultural Relief at the date of the first transfer
  • the property must have been occupied for agricultural purposes by the person making the later transfer or the personal representatives of the person the property originally came from
  • the property should qualify for relief apart from the occupation and ownership tests
  • one of the transfers must occur on death

Farmhouses and cottages

Buildings must be of a nature and size appropriate to the farming activity that is taking place. The property is valued as if it could only be used for agricultural purposes. Any value over and above this ‘agricultural value’, such as the market price of a country residence, does not qualify for Agricultural Relief.

A cottage or farmhouse must be occupied by someone employed in farming or:

  • a retired farm employee
  • the spouse or civil partner of a deceased farm employee

They must occupy the property as either a:

  • tenant under a lease granted as part of their former employment contract
  • protected tenant with statutory rights

Rates of Agricultural Relief

Agricultural Relief is due at 100% if:

  • the person who owned the land farmed it themselves
  • the land was used by someone else on a short-term grazing licence
  • it was let on a tenancy that began on or after 1 September 1995

A property that was owned before 10 March 1981 can qualify for 100% relief if:

  • it would have qualified under Schedule 8 Finance Act 1975 had it been transferred before that date
  • the person who owned it had no possible right to vacant possession between that date and the date of the current transfer

Relief is due at a lower rate of 50% in any other case.

Mortgaged property

Deduct outstanding mortgages or any other secured liabilities on the property before calculating the Agricultural Relief.

Agricultural shares and securities

Some company shares and securities are eligible for Agricultural Relief if their value:

  • gave the deceased control of the company at the time of death
  • comes from agricultural property that forms part of the company’s assets

Find out more about the rules that apply to sales of related property within 3 years after death.

Gifts of agricultural property

If a gift (or portion of a gift) qualified for Agricultural Relief at the time it was made, it will still qualify if it:

  • has been held by the person who received it until their own death or that of the person who gave the gift
  • is agricultural property that has been occupied for agricultural purposes since the gift was made

If the person receiving the gift dies before the person who gave the gift, conditions for relief have to be met both on the date that the gift is given and at the time of their death.

If the person receiving a gift sells it, before the death of the person giving the gift, to a company in exchange for shares in that company then those shares are treated as the original property.

Any additional shares received as a result of a re-organisation or take-over-bid are treated as part of the original gift.

Replacement agricultural property

If agricultural property that qualified for Agricultural Relief is replaced by other agricultural property that also qualifies for relief (apart from the minimum period of ownership requirement) then all of the following conditions must be met if the original property was gifted:

  • all of the sale proceeds must be used to purchase the replacement property
  • the sale and purchase must be an ‘arms length transaction’ in which the buyers and sellers act independently and have no relationship to each other
  • the sale and purchase must take place within 3 years of each other

The original and the replacement property combined must satisfy the conditions shown under ‘Gifts of agricultural property’.

If the agricultural property was in a person’s estate when they died and it had replaced other agricultural property it can still qualify for Agricultural Relief if the original and replacement property:

  • has been occupied by the owner, for the purposes of agriculture, for a total period of at least 2 years during the 5 years immediately before the death
  • was owned and occupied (either by the owner or by someone else) for the purposes of agriculture for at least 7 years during the 10 years immediately before the death

Relief is limited to what would have been available before the replacement.

If the property was sold at less than the market value, relief is limited by the proportion that was given as a gift.


John sells a field on his farm worth £2,000 to his son David on the next-door farm for £500. This means that he is giving David a gift of 75% of the value of the field = £1,500.

David sells the field a year later and uses the £2,000 from the sale to buy another field for £2,000.

John dies 3 years after the sale.

When IHT is calculated the original market value (£2,000) of the field, less the £500 paid (the value that was transferred), rather than the current market value of the field (£2,500) is included as a gift made by John and is eligible for Agricultural Relief.

Business relief

You cannot claim Business Relief on the value of an asset that you have already claimed Agricultural Relief on. However, a farming business may find that Business Relief is available on the value of an asset not fully covered by Agricultural Relief if the conditions are met.

Published 17 June 2013
Last updated 1 May 2019 + show all updates
  1. The example of replacement agricultural property has been updated.

  2. Guidance on Business Relief has been updated.

  3. First published.