Scottish Farm IHT Calculator

What changed in April 2026?

Before April 2026, Agricultural Property Relief (APR) and Business Property Relief (BPR) provided 100% relief from Inheritance Tax on qualifying agricultural land, farm buildings, and business assets — with no upper limit. A farm worth £5 million could pass to the next generation with zero IHT.

From 6 April 2026, APR and BPR are capped at a combined £2.5 million per person (raised from £1M after farmer protests in December 2025). Above that cap, relief drops to 50% — meaning the excess is taxed at an effective 20% IHT rate. A married couple can combine allowances for up to £5 million of 100% relief.

Why this hits Scottish farms harder

Scottish farms are significantly larger than the UK average — 117 hectares compared to 87 hectares nationally, with over 45,000 agricultural holdings. With Scottish prime arable land valued at £10,000–£15,000 per acre, many family farms exceed the £2.5 million threshold. AHDB estimates 67% of Scottish farms over 50 hectares (8,918 farms) are affected by the cap.

The Scottish Government has no power to change IHT rules — it's reserved to Westminster. NFU Scotland has called the change "devastating for family farming" and is lobbying for the cap to be raised.

What qualifies for APR?

• Agricultural land and pasture — must have been occupied for agricultural purposes for at least 2 years (if owner-occupied) or 7 years (if let)
• Farm buildings — buildings used for agriculture (barns, grain stores, livestock sheds)
• Farmhouse — if it's "of a character appropriate to" the agricultural property. HMRC may restrict relief if the house is disproportionately large or valuable relative to the farm
• Cottages and farm workers' houses — if occupied by farm workers

What qualifies for BPR?

• Business assets — machinery, equipment, and vehicles used in the farming business
• Livestock held as trading stock — animals kept for sale or breeding as part of the trade
• Growing crops — unharvested crops at date of death

The APR and BPR caps are combined — you don't get £2.5 million for each. The allowance is allocated proportionally across your APR and BPR qualifying assets.

The 10-year instalment option

IHT on APR/BPR qualifying assets can be paid in 10 annual interest-free instalments. This is critical for farming families — it means you don't need to sell land immediately to pay the tax bill. The instalments become due annually from 6 months after the end of the month of death.

Planning strategies

Several legitimate strategies can reduce the impact:

• Lifetime transfers: gifts of farmland are potentially exempt from IHT if you survive 7 years. APR/BPR may still apply if the recipient keeps the land in agricultural use
• Partnership structures: bringing the next generation into a farming partnership can transfer ownership gradually
• Life insurance: a whole-of-life policy written in trust can provide cash to pay the IHT bill without selling assets
• Spousal transfers: transfers between spouses are IHT-exempt, which can double the available nil-rate bands on the second death