Succession challenges for stud farms and agricultural estates

While farmers have been in the spotlight, stud farms will also be affected by the forthcoming changes to Agricultural Property Relief (APR) and Business Property Relief (BPR). These changes are expected to create significant succession challenges for stud farms and agricultural estates in the years ahead.

The reforms, effective from 6 April 2026 have important implications for succession planning and Inheritance Tax (IHT) management. Currently, stud farms come under the same relief as agricultural farmers, provided their operations meet the necessary agricultural criteria. Much of the rest of the value (not agricultural) can be protected by BPR.

What’s changing?

At the moment, APR means that there is 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.

Draft legislation is not yet available however, it is expected 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%;
• Relief is for each human owner, and cannot be transferred between spouses;
• Anti- forestalling measures mean lifetime transfers made after 30 October 2024 will fall under these rules;
• APR remains limited to the agricultural value of the property, often much lower than market value.

What qualifies as agricultural property?

Agricultural property includes land or pasture used to grow crops or rear animals intensively. For example:

• 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

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. livery) will be classified as non agricultural and will not qualify for APR.

What does this mean 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 and advertising and the commercial nature of its activities.

Equestrian activities such as livery, racing and eventing do not qualify for APR. These operations must rely instead on BPR, requiring evidence of active trading.

Dual-relief properties

Properties eligible for both APR and BPR will now be subject to the proportional application of the £1 million threshold.

Structure

It may be necessary to consider holding stud farms more widely to maximise relief available and to receive 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.

If you have any questions regarding APR or BPR please get in touch with your Swindells partner who will be able to advise you further.