Katie Martin and Louise Garrett discuss the government’s inheritance tax consultation and its impact on property reliefs
Kaite and Louise’s article was published in the IFA Magazine, 1 May 2025, and can be seen here.
Senior Associate, Katie Martin and Associate, Louise Garret explores how proposed reforms could reshape long-standing relief mechanisms, particularly affecting business and agricultural property owners.
The UK government’s proposed changes to inheritance tax (IHT) reliefs—specifically agricultural property relief (APR) and business property relief (BPR)—have sparked significant concern across the farming community. Despite widespread opposition, including calls from NFU Scotland to pause the reforms pending the outcome of DEFRA’s Farming Profitability Review, the Treasury appears committed to implementing the changes from 6 April 2026. These reforms aim to curb perceived tax avoidance but risk imposing new burdens on family farms and rural businesses.
The technical consultation, which closed in April 2025, confirmed that the £1 million APR/BPR allowance will not be transferable between spouses or civil partners, potentially limiting relief in single-ownership scenarios. The allowance will refresh every seven years, similar to the nil rate band, but gifts must be carefully structured to avoid breaching reservation of benefit rules. Estate planning will need to be more robust, with emphasis on full market valuations, proper documentation, and regular rent reviews to ensure compliance. Trusts will also be affected, with relevant property trusts receiving a £1 million allowance for 100% relief on each 10-year anniversary charge, though the administrative complexity is expected to increase.
If enacted, the reforms will reduce APR and BPR to 50% for assets exceeding the £1 million threshold, with IHT payable at 20% on the excess. While the government proposes a 10-year, interest-free instalment plan for paying this tax, concerns remain about the financial strain on farming families. The article advises individuals to consider life insurance and other planning tools to mitigate future liabilities. Overall, the reforms represent a significant shift in how agricultural and business assets are treated for IHT purposes, demanding proactive and strategic planning from affected families and their advisors.
Read the full article on the IFA Magazine website [external link].
