Pass on £350,000 through rural property without transfer duties: an opportunity enhanced in 2025
Are you looking to give meaning to your estate or investments? Opt for a stable and socially useful asset that also allows you to pass on your wealth to your loved ones under optimal conditions. Investing in land or agricultural property is a sustainable choice, offering the possibility of adding an ecological dimension by including environmental clauses in rural leases, while ensuring a thoughtful intergenerational transfer.
In an economic climate where the sustainability and social utility of investments are increasingly valued, have you considered this opportunity? So, in a changing world, how can you ensure peace of mind for your assets?
For several years now, the transfer of rural property has enjoyed considerable tax advantages, allowing owners to lease their land while reducing their tax burden. With the 2025 Finance Act, these advantages are further strengthened, offering a unique opportunity to transfer up to £400,000 (€ ) per child per parent without gift tax. However, this exemption is subject to specific conditions. If these conditions are not met, the tax authorities may call into question the benefits obtained, resulting in the retroactive payment of duties. It is therefore essential to understand the mechanisms involved in order to take full advantage of this measure.
A strategic tax allowance: £345,000 without transfer duties
Each parent can transfer £100,000 (€ ) to each of their children without transfer duties, thanks to the allowance provided for in Article 779 of the General Tax Code (CGI). However, thanks to long-term rural leases, this allowance can be multiplied by four, allowing up to £400,000 (€ ) per child to be transferred without direct taxation. €€This advantage means that only 25% of the value of the property is taken into account. Thus, for a property valued at £400,000, only £100,000 is taken into account when calculating inheritance or gift tax. This allowance is calculated per donor and per beneficiary. €Above the £400,000 example, the allowances continue and can significantly reduce the tax liability. Allowances exist for children, but also for other family members.
What are the allowances based on family ties?
| Family relationship | Amount of allowance |
| Child | €100,000 |
| Grandchild | €31,865 |
| Great-grandchild | €5,310 |
| Nephew/niece | € |
It should be noted that there is a higher allowance for people with disabilities, at £159,325.€
Thanks to the introduction of long-term leases on rural properties, the amount of property included in the tax base is reduced by 75%. This means that the actual value of rural properties transferred, excluding transfer duties applicable to gifts and inheritances, is as follows:
| Family relationship | Amount of the allowance |
| Child | €400,000 |
| Grandchild | €127,460 |
| Great-grandchild | €21,240 |
| Nephew/niece | € |
This allowance on gifts is applicable every 15 years, regardless of your age.
There is often talk of tougher taxation on gifts after the age of 80. This is not covered by Article 779 of the French General Tax Code (CGI), but by Article 790 G (known as the “Sarkozy gift” or “TEPA gift”), which allows you, before you reach the age of 80, to give to a child, grandchild, great-grandchild or, in the absence of such descendants, a nephew or niece, or, by representation, a grandnephew or grandniece, sums exempt from transfer duties, up to a limit of £31,865,€ every fifteen years. However, this exemption is only possible for gifts of sums of money in full ownership and is complementary to Article 779 of the CGI.
The reduction in transfer duties through long-term rural leases is based on specific exemption thresholds (CGI 793 bis), which were increased in 2025.
Two levels of exemption in 2025: 75% and 50%
Since 15 February 2025, the exemption thresholds have been improved:
| Retention commitment | 1st exemption level | 2nd exemption level |
| 5 years | 75% up to €600,000 | 50% above |
| 18 | 75% up to €20,000,000 | 50% above |
These tax benefits are conditional on the property being let under a long-term rural lease and compliance with the rules of the Rural Code and the Maritime Fishing Code.
It should be noted that there is some uncertainty regarding the application of thresholds to leases entered into before 1 January 2025. A press release from the Ministry of Agriculture dated 1 April 2025 (note that this is not necessarily the best date to correct an omission in a law) indicates that the ceilings for transfers occurring on or after 15 February 2025 will be extended to leases entered into before 1 January 2025. The measure will therefore have to be included in the next finance bill. As “press releases” are not part of the legislative arsenal in France, uncertainty remains as to their legal enforceability in the meantime, particularly with regard to whether or not the old thresholds will continue to apply to leases entered into before that date.
It remains to be seen when the next finance bill will be adopted, at a time when the majority in both houses of parliament is uncertain, to say the least.
Shares in agricultural property groups (Groupement Foncier Agricole, GFA) may also be exempt under certain conditions. The articles of association must prohibit direct farming. All funds belonging to the group must be leased on a long-term basis to a farmer (CGI art. 793, 1-4° and 793 bis).
Optimising the Real Estate Wealth Tax (IFI)
Investing in rural property also makes it possible to limit the impact of the IFI, thanks to two possible exemption schemes: the exemption for business property, which will not be discussed in this article, and the partial exemption if the property is leased on a long-term basis, subject to a lease of at least 18 years. Under the same conditions as for gifts and inheritances, there is a partial exemption, but with different thresholds:
| 1st level of exemption | 2nd level of exemption |
| 75% up to £101,897 | 50% above |
Successive laws have not changed the thresholds applicable to the IFI.
If you wish to acquire property that allows you to apply these benefits, please do not hesitate to contact us so that we can help you in your search for land.
Conditions to be met to secure the exemption
What type of lease should you choose?
There are several types of long-term rural leases that will allow you to benefit from these advantages:
- 18-year lease: automatically renewable for periods of 9 years.
- 25-year lease: ends on expiry, unless there is a specific clause providing for tacit renewal.
- Career lease: lasts at least 25 years and ends when the lessee reaches the legal retirement age for farmers.
- Transferable lease outside the family: allows the tenant to transfer their lease under certain conditions.
A nother advantage of these leases is that, in most departments, they allow for higher rents than those set by the departmental prefect. Some increases are provided for directly by the Rural and Maritime Fishing Code: 50% above the prefectural scale for transferable leases outside the family farm framework and 1% per year of the lease for career leases. These improvements in rent make it possible to increase the profitability of the investment and the income from the lease. However, in practice, it is quite rare to exceed 5% or 6% gross profitability.
Legal and tax formalities to be observed
A rural lease cannot be improvised. To guarantee tax exemptions, it must:
- Be concluded for a minimum term of 18 years, without early termination (requires a notarised deed).
- Be drawn up in writing, registered and published in accordance with Articles L. 416-1 to L. 416-9 of the Rural Code.
- Partial exemption does not apply when the lease has been granted for less than two years to the donee of the transfer, their spouse, one of their descendants or a company controlled by one or more of these persons.
It should be noted that the exemption may benefit the bare owner, even if they are not the lessor.
Maintaining the commitment to retain the property: a strict obligation
The application of tax exemptions is strictly conditional on a commitment by the donee to retain the property (for 5 or 18 years). Failure to comply with this commitment will result in the loss of tax exemptions and the payment of additional duties and interest on arrears.
In the case of a gift to a child:
| Value of the property | Retention | Tax base after deduction of the 779 CGI allowance |
| €400,000 | 5 years | € |
| €700,000 | 5 | 75% up to €600,000 – 50% above that amount, i.e. €100,000 € |
| €700,000 | 18 | 75% up to £20,000,000€ , i.e. £75,000 € |
| €10,000,000 | 5 | 75% up to €600,000 – 50% above that amount, i.e. €4,750,000 € |
| 10,000,000 | 18 | 75% up to €20,000,000 – i.e. €2,400,000 € |
Advantages and limitations of the tax scheme
Why is this scheme an opportunity?
It allows you to pass on your estate without incurring excessive taxation. The exemption thresholds have been raised in 2025, making donations more advantageous. Optimising the IFI is a powerful lever for minimising taxation on real estate assets. However, the different thresholds applied to donations, inheritances and the IFI create a discrepancy between these optimisations, thus giving rise to several levels of interpretation and increased complexity.
Furthermore, it is important to note that while the tax benefits are attractive in the context of gifts, inheritance and the IFI, an investment should not be made solely for tax reasons. The investment itself must be attractive. Furthermore, direct investment in land and agricultural property should not be motivated solely by tax considerations. The sustainability of the property itself and the stability of land prices in France, which are low compared to those of our European neighbours (see our article on the difficulties of accessing land), make this type of real estate investment an excellent diversification and a good long-term investment.
Furthermore, landowners are often among the creditors to whom farmers give priority, as the loss of land has a rapid and direct impact on the profitability and sustainability of a farm. Optimising rent and lease costs can maximise the profitability of the property. We are here to assist you with your acquisition projects.
Constraints to anticipate:
- Low asset liquidity due to 5- to 18-year retention commitments.
- Strict compliance with the formal requirements of the lease, otherwise the exemption may be called into question.
- Careful management of previous donations and joint ownership.
- Sector risk: Investing in a single sector may constitute a concentration risk.
Investing in land, on the other hand, has the advantage of these disadvantages, as it can provide diversification and long-term stability.
However, this is not free of charge:
Please note that although this provision is very advantageous, it is not free. When acquiring rural property, you will have to take into account transfer duties (see our article on transfer duties in 2025): (DMTO and notary fees), unless the property is already owned.
Long-term leases are also subject to the payment of duties calculated on the total rent to be received during the first period, as well as notary fees. In practice, these costs are usually borne by the lessee, but there is no legal obligation in this regard: they may be shared or charged to the lessor.
When donating or inheriting property, you may be able to save on transfer duties, but notary fees (emoluments) must still be taken into account, as these are calculated on the total base and not on the reduced base.
We regularly offer agricultural land for sale to enable farmers to set up in business. In this way, you will be contributing to the renewal of the farming community. If you have an investment project in mind, let’s talk about it!
A tax opportunity not to be overlooked
The 2025 reforms offer owners of rural property a powerful tax lever to optimise the transfer of their assets. Thanks to specific exemptions for long-term rural leases, it is possible to transfer up to £400,000 (€ ) per child per parent without paying tax. However, these advantages require rigorous management of tax commitments and administrative rules. Poor planning can result in exemptions being called into question and additional costs. For owners willing to make a long-term commitment, this scheme therefore represents an essential tax and estate planning strategy for securing their agricultural assets.
This article is not investment advice. You remain solely responsible for your investments. All investments involve a risk of capital loss.
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