The future of the family business – Inheritance Tax planning with the proposed changes to Agricultural Property and Business Property Relief

With draft legislation confirming changes to Agricultural Property Relief (APR) and Business Property Relief (BPR), families should act now to protect their legacy through effective Inheritance Tax (IHT) planning. 

1. Maximising the use of allowances

It has been confirmed that the £1m allowance will not be transferable between spouses and civil partners on death. A simple but effective tax planning step would be transferring an interest in any qualifying assets between married couples or those in a civil partnership to ensure both parties hold an interest of at least £1m. In doing so, families could achieve an IHT saving of £200,000. Business owners should review the terms of their Will to ensure that any available allowance will be utilised and not wasted.

Couples can be pro-active and transfer a beneficial interest in the qualifying assets to allow them the opportunity to utilise the allowances in full.  This does not necessarily mean that the legal ownership of the asset needs to be updated, a prospect that many landowners try to avoid.  

2. Restructuring the business for future growth

Should an individual have accumulated sufficient wealth through their business interests to meet their needs, the future growth of the business is unlikely to have a direct benefit to them. This accumulation of wealth, through the growth of the business, will increase the value held at death and consequently the amount subject to IHT.

The structure of the business could be altered to introduce a mechanism in which the future growth of the business is attributed to another member of the family i.e. a child, grandchild.

Should the individual wish to maintain control over this value, it is possible to do so by using a trust or varying the voting rights of a business. There are various methods of achieving this, including altering the rights to shares in a company or the terms of a partnership agreement. 

3. Enhanced lifetime gifting

Lifetime gifting is the fundamental step in most IHT planning strategies. With the changes to APR and BPR, it may be necessary for individuals to start IHT planning at an earlier age than they would typically expect. The value of the gifts made may also need to be more significant to compensate for the potential reduction in IHT relief.

Prior to the introduction of these rules from 6 April 2026, there is a window of opportunity to make significantly larger gifts, particularly into trust. From this date, the IHT relief available on these transfers will be restricted, resulting in these planning strategies being less effective but still possible.

4. Reviewing existing plans

Some individuals may have previously undertaken some IHT planning steps or had a succession plan for the business. With the changes in these rules, the viability of these plans should be reviewed. In some cases, existing tax plans or structures, such as a trust, could benefit from additional allowances and enhance future planning options available.

Any tax planning must be considered alongside your own financial needs and your family circumstances.  Wider tax considerations relating to the implementation of any of the above strategies may exist it is therefore recommended you seek advice.

This article is part of a series exploring the changes to Business Property Relief and Agricultural Property Relief. This series covers the key issues that may arise for business owners after the introduction of these rules on 6 April 2026. Our lead article can be found here.

Should you be concerned about the proposed IHT changes and the impact they will have on your business, it is recommended you seek advice as soon as possible. Please do not hesitate to get in touch with a member of our expert team.