What stud farms need to know about the upcoming APR and BPR changes

Whilst farmers have grabbed the news headlines it is worth remembering that stud farms will also be impacted by the upcoming changes to Agricultural Property Relief (APR) and Business Property Relief (BPR). These developments are set to bring significant succession challenges for stud farms and agricultural estates in the coming years.

The reforms, effective from 6 April 2026, have far-reaching implications for succession planning and Inheritance Tax (IHT) management. In this blog, we outline the implications of the changes for the sector and answer some of our most anticipated or received questions.

Currently, stud farms enjoy the same relief as agricultural farmers, such as APR, provided their operations meet the necessary agricultural criteria. Much of the rest of the value which is not agricultural can be protected by BPR, for instance, potential development parcels of land within an estate. Even our most impressive stud farming clients wouldn’t typically face any tax at all on death or lifetime transfers of value.

From 6 April 2026 there will be the prospect of significant tax costs, certainly in the absence of taking any action/planning.

The reliefs: what’s changing?

Currently, APR provides 100% relief for agricultural properties used for breeding and rearing horses, provided the land is occupied for that purpose. The relief applies if the property is used for agricultural purposes for at least two years (if owned by the operator) or seven years (if leased).

BPR provides 100% relief. To qualify, more than 50% of the business must involve trading rather than passive investment.

Until now both reliefs have been unlimited and, largely, the valuable stud farm properties we advise upon have moved between family members without tax charges applying.

Non-UK resident and non-domiciled owners of UK stud farms will, sometimes for the first time, have an exposure to UK IHT under the proposals even if offshore structures such as Trusts have been implemented in the past as a form of asset protection.

While we don’t yet have draft legislation, from announcements we expect that, from April 2026:

The first £1 million of combined APR and BPR claims will still qualify for 100% relief, but any excess will be reduced to 50%. Think of this as a tax rate of 20% applying.
Relief is for each human owner, and cannot be transferred between spouses, so revising Wills appears crucial for almost all affected.
Anti-forestalling measures mean lifetime transfers made after 30 October 2024 will fall under these rules.
APR will remain limited to the agricultural value of the property, which is often much lower than market value.

APR is restricted to the agricultural value of the property rather than its open market value. Agricultural value reflects the property’s worth under the assumption that it can only be used for agricultural purposes, often resulting in a lower valuation than market value.

Owners should keep in mind:

Hope or development value and the value of sporting rights are not covered by APR, although BPR may apply in some cases.
HMRC typically assesses the agricultural value of farmhouses as being between 60% and 70% of the open market value. However, in some instances, there may be no difference between the two values, for instance, where stud farms are located in very rural areas where there is arguably little prestige value in the property. It is important to note that despite HMRC’s assessment, there is not a fixed standard discount.

What qualifies as agricultural property?

Agricultural property includes land or pasture used to grow crops or rear animals intensively. Examples include:

Land used for growing crops or short rotation coppice.
Stud farms for breeding and rearing horses, and grazing.
Land under schemes such as the Habitat Scheme or crop rotation schemes.
Farm buildings, cottages, and farmhouses.

However, agricultural assets that do not qualify for APR include:

Farm equipment and machinery.
Harvested crops and livestock.
Derelict buildings.
Property subject to a binding contract for sale.

Additionally, land used for grazing horses for non-agricultural purposes (e.g. liveries) will be classified as non-agricultural and will not qualify for APR.

What are the implications for stud farms?

Eligibility for APR

Stud farming qualifies for APR if it involves systematic horse breeding on occupied land. HMRC assesses eligibility based on:

Breeding records
Advertising and the commercial nature of its activities

However, equestrian activities such as liveries, racing, and eventing do not qualify for APR. These operations must rely instead on BPR, which requires evidence of active trading. Passive activities, like leasing grazing land, typically fail to meet the criteria.

Dual-relief properties

Properties eligible for both APR and BPR will now be subject to the proportional application of the £1 million threshold. Stud farms offering different services will now need to consider which reliefs apply and how best they can be maximised.

Structure

It may be necessary to consider holding stud farms more widely, to maximise the number of £1m bands of relief in play and to get the benefit of valuation discounts for joint interests. Whether businesses operate as partnerships, individuals, or in companies, this review of the structure should be undertaken well in advance of April 2026 alongside a review of the Wills of the family owners.

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What can stud farms be doing to prepare for these changes?

Maximise relief opportunities

Stud farms and estates must:

Ensure operations demonstrate commerciality through robust business plans and financial records to optimise eligibility for APR and BPR.
Focus on active trading activities to maintain BPR eligibility.
Evaluate business structures to optimise APR and BPR claims.

Valuation strategies

We strongly recommend seeking advice from experts to determine accurate agricultural and market values. APR applies only to agricultural value, which is often significantly lower than market value, widening the gap under the new rules. It remains unclear whether the Government will revise agricultural value assessments to reflect modern market conditions.

Plan for succession

Address the non-transferability of allowances between spouses.
Evaluate the impact of the combined threshold on Trusts.
Ensure lifetime gifting strategies align with anti-forestalling rules.

Trusts and the combined threshold

Trusts holding agricultural or business property face new complexities under the £1 million cap. Families relying on Trusts for succession planning may encounter challenges in allocating relief, especially when multiple Trusts are involved. You will likely not be able to avoid IHT even if you create a Trust, as Trusts are liable to pay their own inheritance tax charges every ten years.

How can Price Bailey help?

Preparation and proactive planning is key for stud farms to overcome these challenges effectively. Like farmers, stud farm owners share a common goal – to safeguard their estates for future generations. Seeking professional advice on the ownership and structure of these properties is now more critical than ever. At Price Bailey, our expert agricultural and equine team can support you with optimising relief available to you, succession planning, IHT advice and valuations.

We always recommend that you seek advice from a suitably qualified adviser before taking any action. The information in this article only serves as a guide and no responsibility for loss occasioned by any person acting or refraining from action as a result of this material can be accepted by the authors or the firm.

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