FARMERS are being reminded to protect valuable tax reliefs available to them after the value of Agricultural Property Relief claimed last year fell by £354million.

Agricultural Property Relief can enable farmers to pass agricultural land and buildings to the next generation free from inheritance tax, which is charged at 40%.

It can save farming families thousands of pounds by helping them hand over the farm in a tax-efficient way.

Latest figures from HMRC show that the value of APR claims fell £354m in 2018/19 compared to the year before, and there were 190 fewer farms claiming it.

Chartered financial planner at NFU Mutual, Sean McCann, said: “There are a number of ways farmers can lose Agricultural Property Relief.

“Renting out all of your land on a farm business tenancy and remaining in your farmhouse would prevent you claiming APR on the value of the house. This could be a common scenario for some of those farmers who choose to exit the industry under DEFRA’s new proposals next year.

“Diversification can also lead to a loss of APR, as farmland and buildings won’t qualify for the relief if they are no longer used for agricultural purposes.

“Although Business Property Relief may be available in some circumstances depending on the type of business, it won’t be available in all cases," said Mr McCann.

“Allowing other family members to set up non-agricultural businesses, such as farm shops or workshops, in buildings that you own, could lead to a large and unexpected tax bill.

“Using land or buildings for non-agricultural purposes such as holiday lets or camping will also cause farmers to lose APR on that asset.

“With farmers facing a huge financial upheaval with the change to subsidies, it’s crucial those who do decide to diversify or rent out their land or buildings seek advice on the inheritance tax implications.”