The changes to Business Relief (BPR) and Agricultural Property Relief (APR) were announced in the last Budget and have been widely discussed, particularly within the farming community. Now that the latest Budget has confirmed the position, owners of family businesses and agricultural enterprises have until April to take advantage of transitional planning opportunities.

Currently, qualifying business and agricultural property can benefit from 100% relief from inheritance tax (IHT). From 6 April 2026, this will change:

Relief will be reduced to 50%, with a combined exemption of £1 million for both business and agricultural property.
Any value above £1 million will attract IHT at 20%.
The £1 million allowance refreshes every seven years, similar to the nil rate band.
Unused allowances can now be transferred between spouses, which is helpful but unlikely to fully protect businesses exceeding £2 million in value.

What does this mean for you?

Careful planning is required between now and April 2026. This may include:

Coordinated lifetime gifts and trust settlements.
Reviewing existing trusts and Wills.
Considering family investment company structures, often combined with trusts.
Obtaining accurate business valuations to inform planning.

Key questions to consider

What is your long-term goal for the business? Saving IHT may be a goal, but don’t let this be the only driving factor. Other factors, such as succession planning and asset protection, may be important. It may be that IHT changes are less relevant if a sale of the business is imminent. If the plan is to build and grow a business for the next generation, then plans should be implemented sooner rather than later to mitigate the impending tax charges.
What is the ownership structure? For sole owner businesses, this is not an issue, but often with long-standing businesses that have undertaken changes and reorganisations, ownership is not as clear as it should be.
Are your Wills and trusts fit for purpose? Are any trusts approaching the 10-year anniversary? Do any specific gifts of business assets in your Will work from an IHT perspective?
Would a share reorganisation or family investment company help? Consider whether a share reorganisation and gift of some of the value of a business by way of a family investment company structure would be prudent, and include a discretionary trust if appropriate.
Do you have accurate valuations? Historically, this was not an issue when 100% relief was available, as the focus was more on proving qualification for the relief than on an accurate valuation. However, now that a potential tax is on the horizon, it is important as part of the number crunching exercise to have proper values in place. This will also help trust structures holding business assets prepare for any impending IHT charges. No doubt valuing of minority shareholdings with applicable discounts will need careful analysis, thus making it increasingly important for valuations to be undertaken by those with the right expertise.
Have you considered cash flow for future tax liabilities? This is especially important for business assets held within trust structures. Although the IHT charge can be paid in 10 annual instalments, interest is charged on any unpaid IHT; hence, this needs to be factored in when balancing the books. It may be that there are alternate solutions for assisting with the charge, such as life insurance for estates holding business assets be considered.
Do you have the right advisors? Whilst your day-to-day advisor might be sufficient to assist with more general advice and running of the business, do they have the expertise to help you with a more holistic approach to your succession and business strategy issues? It would be a good time to consider putting in place a Lasting Power of Attorney which relates to your business assets only (Business LPA). The Business LPA ensures that your Attorney is someone who has the experience to oversee the running of your business should you become incapacitated.

How we can help

Our Private Client and Corporate & Commercial teams can guide you through these changes and help you develop a tailored succession and tax strategy. Contact your usual Lester Aldridge advisor to start the conversation.