Significant reforms to Agricultural Property Relief (APR) and Business Relief (BR) are set to take effect from 6 April 2026. These changes aim to recalibrate inheritance tax (IHT) reliefs, targeting what the Government regards as high-value estates while attempting to preserve support for smaller family-run farms and businesses.
Key Changes to APR and BR:
£1 Million Combined Allowance
A new £1 million combined allowance will apply to the total value of qualifying agricultural and business property eligible for 100% relief. This means that the first £1 million of qualifying assets will remain fully exempt from IHT. However, assets exceeding this threshold will be subject to reduced relief. The £1 million allowance is not transferable between spouses so careful planning will be required to maximise exemptions.
50% Relief on Excess Value
For assets above the £1 million allowance, the relief will be reduced to 50%, effectively applying a 20% IHT rate on the excess value, compared to the standard 40% rate.
Impact on Trusts
Trusts established before 30 October 2024 will receive their own £1 million allowance for qualifying assets. However, trusts created on or after this date will share the £1 million allowance with other trusts set up by the same settlor, limiting the ability to multiply relief through multiple trusts.
Key Implications:
Family Farms
While the reforms are allegedly designed to protect smaller family farms, there is concern that many may still be affected, especially in regions with high land values. For example, the National Farmers Union estimates that 75% of commercial family farms could fall above the £1 million threshold.
Succession Planning
The changes will likely necessitate a re-evaluation of succession plans. Landowners might need to consider lifetime gifting strategies or adjustments to trusts to mitigate potential IHT liabilities.
What Should You Do Next?
- Review Estate Plans: Landowners should consult with legal and tax advisors to assess how the new rules will impact their estates and consider strategies to minimise IHT exposure.
- Consider Timing: With the reforms set to take effect in 2026, there may still be opportunities for planning and structuring assets before the changes are implemented.
- Stay Informed: Engage with professional bodies and keep abreast of any further consultations or guidance issued by HM Revenue & Customs.
These reforms represent a significant shift in the landscape of agricultural and business property reliefs. At Cleaver Fulton Rankin we have considerable experience and expertise in advising business owners on appropriate estate planning measures. If you need any advice or assistance in relation to these issues, please contact a member of the Private Client Team.
Contact Us
Our team at Cleaver Fulton Rankin can provide you with the specialist advice you need to ensure that your succession plan works for you and your business. For advice and guidance, please contact a member of our team.
This article has been produced for general information purposes, and further advice should be sought from a professional advisor.
How can we help you?
Call us on the Belfast number below or send us a message and one of our team will be in touch.
028 9024 3141Send us a Message