There has been much media attention on the impact of Inheritance Tax (IHT) changes on the farming community, but it is important to emphasise that these will affect family businesses – sole traders, partnerships and companies – across all other sectors.
Changes to Inheritance Tax reliefs
Draft legislation has now been published confirming changes to IHT Business Property Relief (BPR) and Agricultural Property Relief (APR).
Currently, 100% relief is available on qualifying assets which results in no IHT charge being payable on an owner’s death.
However, from April 6 2026, 100% combined APR and BPR relief will be restricted to the first £1million, with 50% relief available thereafter.
The £1 million allowance is per individual and is not transferable between spouses or civil partners, so steps to help fully utilise the allowance (possibly by transferring assets to others or into trust) should be considered.
Business Property Relief
Business Property Relief reduces the value of a business or its assets when calculating the amount of IHT due.
It is available on relevant business property, which includes:
- A trading business (such as a sole trader)
- An interest in a trading business (such as a partner in a partnership)
- Unquoted shares in a trading company (such as shares in your private company)
Conditions apply, so it is important to review your business regularly to check that it still qualifies for BPR.
For example, a business which consists “wholly or mainly” of dealing in shares, land or buildings or making or holding of investments will not qualify.
The BPR changes will impact any trading business valued at more than £1 million.
Estates will pay an effective IHT rate of 20% (i.e. 50% of the normal 40% rate) on qualifying business assets over £1million.
Mitigating the impact of IHT changes
While the final legislation is still awaited, all business owners should fully review their affairs and consider how the changes may impact their IHT positions.
Planning opportunities are available, particularly before April 6 2026, so it is important to explore the options available to you.
If you think you may be impacted by these changes, we strongly recommend that you discuss your options as soon as possible with a specialist adviser.
