In the first of three blogs, we look at changes to Business Property Relief (‘BPR’) and Agricultural Property Relief (‘APR’) announced in the Autumn Budget on 30 October 2024.
Overview
BPR and APR have historically been key reliefs for families with business and/or agricultural assets, providing up to 100% Inheritance Tax (‘IHT’) relief on qualifying business and agricultural property, enabling family businesses and farms to be passed down to the next generation without attracting a significant IHT burden.
However, as from 6 April 2026, claims for BPR and APR at the rate of 100% will now be capped at £1 million, combined, for each taxpayer, which does not include such property that would qualify for BPR and/or APR at the rate of 50%. The rate of relief for any value above £1 million will be 50%. Another significant change to BPR is that shareholdings in companies qualifying for BPR listed on the Alternative Investment Market shall only qualify for BPR at 50%, not 100%.
Implications
The reduced reliefs will impact owners of trading businesses that would previously have qualified for BPR at 100% on the entire business value, particularly family-owned businesses.
As the cap on relief at 100% is combined for APR and BPR, families with considerable land holdings, farms or other agricultural properties could be significantly impacted, as they may need to claim both reliefs.
Capping claims for 100% APR and BPR to a combined value of £1million will increase IHT exposure for these owners and may create financial difficulties for them to fund the tax, potentially complicating succession planning for often long-established farms and businesses. Unexpected IHT charges may also place businesses and farms at risk if a fire sale of assets is required to pay the IHT.
Next steps to consider
Whilst the reforms will likely increase IHT liability, there are steps you can consider to protect your business assets and agricultural property, including:
- Re-evaluate ownership structures: Families could assess whether their current business ownership structure remains advantageous under the new BPR rules.
- Update succession plans: Families, particularly farming families, could revisit their succession plans, especially if they relied on the previous APR and BPR rules. Lifetime gifting options to beneficiaries may also reduce the value of property qualifying for APR and BPR within the estate.
- Insurance: Life insurance policies that cover IHT liabilities could provide liquidity upon the death of the business owners/farmers, potentially ensuring that the business/farm does not have to be sold to pay IHT.
If you would like to discuss BPR and/or APR and how they may impact your assets, please contact our Private Client team on 01638 560556. Alternatively, you can email a member of the team directly at mike.lambert@edmondsonhall.com or stephen.roberts@edmondsonhall.com.
This blog is a general summary of the law. It should not replace legal advice tailored to your specific circumstances.
