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

Significant Inheritance Tax (IHT) changes were announced in the Budget on the 30 October 2024. Most notably, a proposed overhaul of certain IHT reliefs including Agricultural Property Relief (APR) and Business Property Relief (BPR) that are set to take effect from 6 April 2026. 

The recent government consultation provided some additional information on these proposed rule changes, but significant questions remain. We have highlighted some of these considerations in our response to the consultation here.

Without certainty, it is particularly difficult for individuals and families to decide what is the appropriate course of action when undertaking IHT planning. Individuals in the later stages of life may not be prepared to wait before some more technical information is provided. This technical information may also be available with insufficient time to implement a coherent plan. 

To ensure that their family business can be continued by future generations, individuals may want to take proactive steps now.  

The changes

Currently, 100% IHT relief can be obtained on assets that satisfy the relevant qualifying conditions. There is no limitation on the value of assets which can qualify for these reliefs. 

Under the proposed changes, estates with qualifying agricultural or business property will only be able to claim 100% IHT relief on the first £1 million of qualifying assets. The business/agricultural value that exceeds this £1m allowance will only qualify for 50% relief before being subject to IHT at 40%. These changes will result in a major increase to the effective IHT rate. 

Whilst this allowance may appear to be generous to some, a substantial proportion of UK business owners are likely to be impacted by these changes.  

These proposed rule changes open a web of connected issues beyond the additional IHT liability, something that we will explore in a series of connected articles, these include: 

• IHT planning with the proposed changes; 
• Financing the settlement of IHT; 
• The impact on business succession plans and structures; 
• The impact on Wills.  

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.