Inheritance Tax is the tax due on the value of an individual’s estate when they die. The Inheritance Tax threshold for the current tax year is £325,000, so in the event of death, an estate worth more than £325,000 will incur a tax charge of 40% (or 36% if 10% or more of the estate is gifted to charity). The estate includes property, money and possessions.
You can however give agricultural property free of Inheritance Tax, either during your lifetime or as part of your will, if you qualify for Agricultural Property Relief (APR). In order to qualify for APR, two key conditions must be satisfied: the property must be relevant agricultural property, and it must have been held for a minimum period of ownership. The minimum period of ownership is different depending on whether the owner occupied the land or whether it was tenanted.
APR can be claimed up to a rate of 100% and it is given on the agricultural value of the property, not the commercial value. It is possible that the commercial value of the land and business will be higher than the agricultural value, but if all qualifying conditions are met, then Business Property Relief can be claimed on the difference between the market value and the agricultural value, thereby allowing full relief.
It is always worth reviewing your Inheritance Tax position with your tax advisors. Please contact Green & Co for more information.
Please note: This article is a commentary on general principles and should not be interpreted as advice for your specific situation.
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