The Impact and Strategies for Agricultural and Business Property Relief Changes

One of the key points that came out of the Autumn budget last year was the impending changes to Agricultural Property Relief (APR) and Business Property Relief (BPR) that will significantly impact the way individuals manage their estates and plan for Inheritance Tax (IHT). As both reliefs become more restrictive, and owners of farms – or other businesses – will need to reassess their strategies to mitigate IHT liabilities.

The current maximum 100% relief rate will only be available for the first £1m of combined agricultural and business assets. Any value above this threshold will be subject to a reduced relief rate of 50%, resulting in an effective tax rate of 20%.

What’s the Impact on Estate Planning?

1. Increased IHT Liabilities: The most immediate effect of these changes will be an increase in IHT liabilities for many individuals. If agricultural land or business assets are no longer eligible for full relief, owners could face a higher tax burden.
2. Asset Valuation: Without the APR or BPR exemptions, farm or business assets could significantly inflate the value of an estate, triggering a larger tax bill.
3. Retirement or Succession Planning: The reforms could impact the ability to pass on agricultural or business assets to the next generation without incurring substantial IHT. Owners who were counting on these reliefs as part of their strategy may need to rethink their approach, especially if they intended to leave the farm or business to family members.

What are the Key Strategies to Mitigate the Impact?

1. Review Ownership Structures: Owners should start by reviewing their ownership structures. Joint ownership or transferring assets to family members or trusts may allow owners to reduce the value of their estates.
2. Active Farming or Business Activities: Ensuring that land is actively farmed or that a business remains operational will be crucial to retaining eligibility for APR and BPR, ensuring farmland, particularly if let to tenants, qualifies for APR and also reviewing business operations to ensure they remain sufficiently “trading” to qualify for BPR.
3. Early Succession Planning: Now’s the time to begin succession planning. Transferring assets early, especially through lifetime gifts, can allow individuals to take advantage of current APR and BPR rules.

ARE YOU PREPARED?

The changes to APR and BPR are set to take effect on 6 April 2026 and represent a significant shift in the landscape of inheritance tax planning for agricultural and business owners.

While these changes may increase IHT liabilities for many, with the right strategies in place, individuals can still protect their assets from the taxman. Early planning, active management of assets, and expert advice will be key to ensuring that owners can navigate the new rules successfully and continue to pass on wealth to the next generation.

TC Group have agricultural experts who can help you plan effectively and in time for these changes. Contact our team today.

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