Following the announcements in the Government's October 2024 budget, UK farmers and business owners must start to get to grips with the proposed changes to inheritance tax and the well-established Agricultural Property Relief (APR) and Business Property Relief (BPR) incoming in April 2026. Whilst we await a date for the draft legislation (understood to be towards the end of 2025), business owners are advised to review their businesses and, ultimately, their legacy.
Key changes
The key changes proposed in relation to APR and BPR from April 2026 are as follows:
- The cap: From April 2026, the availability of 100% APR and BPR relief for qualifying assets will be capped at a combined value of £1 million (the £1 million allowance).
- Reduced relief beyond the cap: Once the £1 million allowance is exceeded, a reduced rate of 50% relief will apply to any additional qualifying assets.
- Transference of relief between spouses: The £1 million allowance will not be transferable between spouses, so we return to a "use it or lose it" scenario.
What can you do?
Navigating the proposed new rules is difficult without the draft legislation, and given the uncertainty of the market.
If you are likely to be affected by these changes, start with the basics. Here are some questions to consider from the outset:
- What do you own and how do you own it? Make a list, detail all your personal assets, liabilities and business interests. If you co-own assets with others, how is that co-ownership regulated (by partnership agreement, shareholders agreement, declaration of trust, etc.).
- What is the current net value of your estate? Valuations are key and their importance will only increase because of these changes. Without current values, you cannot begin to plan as effectively for the financial implications these changes will have.
- Where and how would your estate source the liquidity to cover the inheritance tax? Does the business have sufficient liquidity, are there other assets (such as life insurance cover) or will the business need to be sold?
- Do you have a plan for succession at an operational level? Have you discussed this with your successor?
Action
Being organised and seeking professional advice on how these changes impact your business will enhance yours and your business' resilience. Alongside this, we recommend you review your estate planning including Wills, lasting powers of attorney and corporate governance documents.