Relief on a Farmhouse

What Is a Farmhouse?

There is no legal definition of a farmhouse. Generally, the farmhouse should be the property in which the farmer lives and the center on which the farm is managed.

Looking at the whole farm helps determine whether the agricultural land is the dominant feature and therefore if the house is occupied with the land. When considering the house itself, the size of the property, layout and style will determine whether the property is “character appropriate.” What is appropriate will also vary from area to area depending on the housing stock in that locality, including other farmhouses.

Why Is It Important?

These factors are important to maximise Agricultural Property Relief for Inheritance Tax purposes.

It is important to be involved in the farming practice and demonstrate the house is occupied with the land as much as possible. Maintaining evidence, which may include: minutes of meetings held at the farmhouse, storing the farm accounts, making sure all farm correspondence and invoices are addressed to the farmhouse, is therefore important to build a body of evidence to support the APR claim.

Is Relief on a Farmhouse Changing?

The 2024 Autumn Budget announced a cap on Agricultural Relief of £1m from April 2026. Assets valued over £1m, which would otherwise qualify for full relief, will instead be restricted to 50% relief. The £1m allowance will include the agricultural value of the farmhouse. This may mean the farmhouse will bear a greater amount of Inheritance Tax.

Is the Residence Nil Rate Band (RNRB) Available on a Farmhouse?

In theory – yes. This is a relief which can be utilised on death. However, there are rules that apply to the RNRB, such as who the property passes to and how. Moreover, the RNRB is only available in full where the deceased’s estate has a value of less than £2m. Therefore, it’s likely on all but the smallest farms that the RNRB will be tapered or lost completely.

Get In Touch

For more information or advice on the relief available on a farmhouse, get in touch with your usual Whitings contact or your local Whitings LLP office today.