Agricultural Property Relief and Business Property Relief after the Budget

In her budget at the end of October, the Chancellor Rachel Reeves announced some significant changes to Agricultural Property Relief and Business Property Relief, making now the time to start some critical planning. Here at TLT our experts can help mitigate some of the additional taxes for families who own agricultural and/or business assets.

What are the reliefs currently?

Agricultural Property Relief (APR) is a relief from Inheritance Tax (IHT) which applies to the transfer of qualifying property. APR is given at either 100% or 50% of the agricultural value of the asset.

Business Property Relief (BPR) is a relief from IHT which applies to the transfer of relevant business property. It is given at either 100% or 50% of the value of the asset being transferred.

What will happen?

From 6 April 2024, APR will extend to land which is managed under a qualifying environmental agreement. This is a carryover from the previous Conservative government and is expected to be legislated by the Finance Bill 2024-25.

In early 2025, it is anticipated that the government will start consultation of APR and BPR with a view to bringing in the following changes:

• From 6 April 2026, APR and BPR at the rate of 100% will only be available for the first £1 million of qualifying assets.

• If an individual owns APR and/or BPR qualifying assets valued at more than the £1 million allowance, then the allowance will be applied proportionately across the qualifying assets.

• If the allowance is exceeded, then the maximum relief available on the value over the £1 million allowance is 50%.

• Assets automatically qualifying for 50% relief will not use up the £1 million allowance.

• BPR on shares designated as “not listed” on the markets of recognised stock exchanges (e.g. the Alternative Investment Market) will be reduced to 50% (and so will not use the £1m allowance).

• Unlike the nil rate band, any unused part of the £1 million allowance cannot be transferred between married couples or civil partners.

The new allowance will apply after 6 April 2026 to:

• Property in an individual’s estate on their death.

• Gifts made on or after 30 October 2024 and in the seven years before death if the death occurs on or after 6 April 2026.

• Lifetime chargeable transfers (e.g. gifts into a trust).

Relevant Property Trusts will have a £1 million allowance on the value of qualifying property to which 100% relief applies on each tenth anniversary charge or exit charge. This makes it more likely that IHT will arise for trustees of certain trusts from 6 April 2026.

Where settlors have made more than one trust before 30 October 2024, each trust will have its own £1 million allowance.  Where a settlor creates multiple trusts after this date, the £1 million allowance will be shared between all the trusts.

What can I do now?

It is worth remembering that the changes announced are currently only proposals, they are not yet law and therefore may still yet be subject to change.  Whilst we await legislation, we recommend that you should:

• Establish your potential exposure to IHT as a result of the proposed changes.  This will involve a comprehensive evaluation of all the assets and liabilities in your estate.
• Review your Will and any existing trusts you have in place from an IHT perspective.  It may be that provisions which were previously tax efficient are not as efficient under the new rules.
• Consider whether there will be sufficient assets in the estate to settle any tax liability and whether these assets are liquid or will need to be sold.

Every case will be different, and it is therefore important that you take advice specific to your personal circumstances. Get in touch with our team of trusts and estates experts. 

This publication is intended for general guidance and represents our understanding of the relevant law and practice as at November 2024. Specific advice should be sought for specific cases. For more information see our terms & conditions.