Agricultural Property Relief (APR) reform – what charity legacy officers need to know

Until April 2026, Agricultural Property Relief (APR) could provide up to 100% relief from inheritance tax (IHT) on qualifying agricultural property. In many cases, this meant that farming estates passed between generations with little or no IHT liability.

Following the Autumn Budget in October 2024, this position has changed. The government has introduced a cap on APR, now set at £2.5 million per individual (increased from the originally proposed £1 million).

Under the new rules:

• Full APR applies to the first £2.5 million of qualifying assets;
• Any value above this threshold receives only 50% relief.

Importantly, this £2.5 million allowance applies in aggregate across both APR and Business Property Relief (BPR). The reform brings a significant number of farming estates into the scope of IHT for the first time and changes how those estates will be administered in practice.

Why this matters for charitable legacies

For charities, these changes could create a more complex environment for legacy income involving agricultural assets.

Charitable giving remains exempt from IHT, and this may become increasingly relevant for individuals who are now exposed to tax for the first time. In that sense, there is a clear opportunity for charitable legacies to play a more prominent role in estate planning.

At the same time, the introduction of IHT into these estates creates real financial pressure. Farming estates are typically land-rich but cash-poor, and where a tax liability arises it must be funded through asset sales, borrowing, or the use of available funds. In all cases, these decisions affect the overall value available for distribution. For charities, this means that gifts, particularly residuary gifts, are more exposed to the underlying economics of the estate. Inheritance tax and administration costs are generally met before residue is distributed, so an increase in tax on assets that were previously exempt will directly reduce the value passing to residuary beneficiaries.

In addition, the introduction of an IHT liability increases the complexities for executors. They must now decide how to fund the tax while balancing competing priorities, preserving the viability of the farming business, treating beneficiaries fairly, and complying with tax obligations. These priorities are often in tension. Beneficiaries involved in the farm may wish to retain land, while others, including charitable beneficiaries, may prioritise realisable value. This could lead to an increase in disputes in estates with agricultural assets. It is therefore possible that estate administration is likely to become more complex and time consuming and therefore more costly.

However, while the APR reforms introduces new risks around liquidity, timing and administration, it also brings charitable giving into sharper focus as part of estate planning for agricultural assets. For some estates, this will be the first time that inheritance tax has been a meaningful consideration, creating a genuine opportunity for charitable giving to feature in tax planning discussions, not just as a philanthropic choice but as part of managing overall tax exposure. Charity Legacy Officers who understand both the risks and the opportunities created by these reforms will be best placed to protect legacy income and, in some cases, strengthen it.