The much anticipated consultation on the Business Property Relief (BPR) and Agricultural Property Relief (APR) changes finally came on 27 February. Most of it was as expected but there was clarification of some of the new rules, and it wasn’t all bad news.
The Budget on 30 October 2024 changed the inheritance tax exposure on BPR/APR qualifying assets significantly. Before that date, those assets could potentially be left in a person’s estate or gifted without any inheritance tax. That now looks very different. Those same assets could be exposed to inheritance tax post 5 April 2026, as 100% relief will be restricted to the first £1m of the combined value of agricultural and business property and the excess will only get 50% relief.
The rules are complex, and the nuances of the detail and planning opportunities will be different for each individual. Here are the key headlines:
The good news
- Unlimited 100% relief is still available until 6 April 2026
- The £1m allowance refreshes every 7 years in a similar way to the inheritance tax nil rate band
- This means you can still settle £1.65m of BPR/APR qualifying assets into trust every 7 years
- If you make a gift to an individual of BPR/APR qualifying assets and survive 7 years you get the £1m allowance back in your estate
- Gifts made before 30 October 2024 will not be brought into the £1m allowance if there is a death within 7 years
- Where the 10-year anniversary is before 6 April 2026 the period for trustees to consider distributions without an inheritance tax charge may be extended
- Interest free instalments over 10 years should be available
The not so good news
- Trusts settled by the same person are likely to be considered together when looking at the % shareholding of a company – this limits the availability of discounts and prevents individuals from settling into multiple trusts to take advantage of lower taxable values within each trust
- £1m allowance is not transferrable between spouses/civil partners
- Certain trusts, included in beneficiaries’ death estates, will be combined with an individual’s other assets for the purposes of the £1m allowance
- Valuations will now become more important than ever before
- AIM listed shares will not qualify for the £1m allowance but will instead only qualify for 50% relief
What do you need to do now?
Consider your succession plan before 6 April 2026, to include:
- Reviewing your current position and the impact of the changes
- A valuation may be needed to fully understand any inheritance tax exposure
- When you understand your exposure, you can consider a strategy to mitigate
- This may include options for gifting to individuals or Trusts
- A gift strategy may include current value and/or future value of your estate
- If you already have a Trust, you should review that it meets your original objectives and consider any planning points
- If you are thinking of selling your company in the next 1-5 years, consider planning in advance of the sale, and before 6 April 2026
- Alongside all of this you should review your Wills
- Directors of Companies should review the impact on the Company where shareholders will be impacted by the changes
Eyes wide open
Let’s remember, this is a consultation. Whilst it provides more certainty on the mechanics of the changes, the consultation runs for 8 weeks, closing on 23 April 2025 with the opportunity to provide comment. It won’t then be until later in the year the changes are ratified in law and we will know for sure the new landscape of BPR/APR.
You need to be sure you fully understand the opportunities for planning and the consequences. Taking the right advice over the new rules is imperative in the coming months.
