What the latest consultation could mean for your estate planning

Inheritance Tax (IHT) has always been a thorny issue for business owners and those with agricultural holdings. But following proposals announced in the Autumn Budget 2024, fresh challenges are on the horizon, particularly for trusts. The government’s consultation on changes to Business Property Relief (BPR) and Agricultural Property Relief (APR) is underway, and its impact could be far-reaching.

At APT Legal, we’re keeping a close eye on these developments to ensure our clients, business owners, families, and trustees, stay one step ahead.

What’s Being Proposed?

From 6 April 2026, a new cap of £1 million will apply to the total value of assets that qualify for 100% relief under BPR and APR. Anything above this threshold will still benefit from some relief, but only at 50%.

Let’s say your business assets are worth £2 million and fully qualified for BPR. Under the current system, that full amount could pass IHT-free. Under the proposed changes, half of it could now be exposed to Inheritance Tax, at 20% or more depending on your circumstances.

One key detail that’s caused some concern, this cap won’t be transferable between spouses or civil partners, making Will reviews essential for those with shared estates.

Trusts Under the Spotlight

The consultation, which remains open until 23 April 2025, is particularly focused on trusts that include business or agricultural property. The proposed rules include:

• New Trust Entries: From April 2026, the amount of relief available when transferring qualifying assets into a trust will depend on the settlor’s £1 million cap, factoring in previous gifts made in the last seven years.
• Trust-Specific Allowances: Each trust will have its own £1 million limit for 10-year anniversary and exit charges. This will likely increase administrative complexity for trustees.
• ‘Grandfathering’ Provisions: Trusts created before 30 October 2024 may benefit from transitional relief. If qualifying assets are removed before the trust hits its first 10-year anniversary after 6 April 2026, full relief may still apply.

Why It Matters

These proposals could significantly alter the landscape for estate planning, particularly for families that use trusts or rely on business and agricultural reliefs.

• Valuations Will Be Critical: With relief now capped, accurate market value assessments will be vital when planning transfers or setting up trusts.
• Trust Management Becomes More Complex: Trustees will need to monitor usage of the cap across different trusts and beneficiaries, potentially seeking professional support to stay compliant.
• There’s a Limited Window to Act: It may be sensible to restructure or extract certain assets from existing trusts before April 2026, depending on individual circumstances.

What Should You Do Now?

Although the changes won’t come into effect until 2026, proactive planning is key. If you’re a business owner, a trustee, or someone who uses trusts as part of your Will or estate planning, now is the time to review your arrangements.

You may also want to consider updating your Will, particularly if it includes business or farming assets or makes use of trusts. And if you act under a Lasting Power of Attorney, understanding how these changes might affect your duties will be important.

APT Legal Can Help

At APT Legal, we specialise in estate planning with a clear, practical focus. Whether you’re looking to safeguard your family business, plan for the future of your farm, or manage trusts responsibly, we’re here to guide you through the upcoming changes.

Ready to review your estate plan?
Visit apt-legal.co.uk or get in touch to speak with one of our team. You can text or call this number: 07771 868235