You’ve probably heard the rumblings about this one (if not the literal rumblings of tractors on their way to protests). Yes, the new £1 million cap on Agricultural Property Relief (APR) and Business Property Relief (BPR) has caused quite the stir. Farmers armed with pitchforks haven’t quite stormed Westminster yet, but there’s been plenty of talk about how these changes might uproot the future of the farming industry—and rightly so.
But wait, small and medium-sized business owners, don’t feel left out—you’re in this too. The changes to BPR will affect anyone running a qualifying business, not just those tending the fields. So, let’s break it down.
What’s Changed?
- Old Rules: Unlimited APR and BPR were available for qualifying farm or business assets. Yes, unlimited—as in, if your farm was worth £20 million and fully qualified, not a penny of it was taxed under IHT. Blissful days.
- New Rules: From April 2025, the first £1 million of farm or business assets will still qualify for 100% relief, but anything above that will be taxed at 20%.
- Anti-Forestalling Measures: The government isn’t messing around here. If you’ve made a lifetime transfer of assets on or after 30th October 2024, and you pop your clogs on or after 6th April 2026, the new £1 million cap will apply. No sneaky asset shifting to beat the deadline, thank you very much.
Who’s Affected?
The headlines have rightly focused on the farming community, who are bracing for the financial strain this will bring. But let’s not forget small and medium-sized business owners, whose estates may also face the 20% tax on anything over that £1 million cap. This isn’t just a rural problem—it’s a national one.
Is This a Crisis? Or Just a Call to Plan?
Before you jump to conclusions (or onto a tractor), let’s inject some calm into the discussion. Yes, this is a big change, but all is not lost. There are still plenty of planning opportunities that can help reduce, or even eliminate, the impact of this legislation. The key? No knee-jerk reactions. Panic planning is bad planning.
First Step: Know Your Position
Before we can tackle the problem, we need to know what we’re dealing with. This is where the dreaded personal balance sheet comes into play. You need:
- Up-to-date valuations for all assets—farms, businesses, pensions, and everything in between.
- A clear understanding of your wishes, which means revisiting (or creating) a Will.
Sometimes, a simple tweak—like adjusting husband and wife Wills—can mean you avoid the problem altogether. Honestly, I’m starting to sound like a broken record, but if this doesn’t convince you to prioritise an up-to-date Will, I’m not sure what will.
Planning Options
Once we’ve got a clear picture of your situation, we can start looking at options. The good news? There’s plenty that can be done:
- Splitting ownership: Moving assets between family members to make the best use of reliefs.
- Trusts: Exploring discretionary trusts to reduce taxable estates.
- Family Investment Company (FIC): A private company set up by family members to hold and manage wealth, such as investments, in a tax-efficient structure, allowing control over assets while potentially reducing inheritance tax exposure.
- Inheritance Tax Life Assurance Policies in Trust:
Each option comes with pros and cons, and no one solution fits all. Planning needs to be tailored to your unique circumstances and flexible enough to adapt to future changes (because, let’s face it, there will be more changes).
Keep Calm and Get Your House in Order
The most important thing you can do right now is arm yourself with knowledge. Once we know the size of the estate, the eligibility for relief, and what your wishes are, we can create a plan. With a clear head and a bit of preparation, this legislation doesn’t have to spell financial disaster.
Oh, and don’t forget to choose your executors wisely—or, at the very least, make sure your Will allows them to seek professional advice. Estate administration is about to get even more complicated, so let’s make it as painless as possible.
Final Word
This is a big deal, no question. But with proper planning, a robust strategy, and a bit of sensible thinking, we can work through it. Don’t panic, don’t overreact, and definitely don’t ignore it. We’re here to help you navigate this new landscape with as little IHT pain as possible—and maybe even a smile or two along the way.
