Following a nine month wait, draft legislation has been released to enact the proposed reforms to Agricultural Property Relief (APR) and Business Property Relief (BPR).
In line with the earlier budget announcement, the draft legislation continues to limit the amount of relief at 100% that is available on the value of qualifying agricultural property and relevant business property that is comprised in an individual’s estate or in a trust. The total amount of 100% relief on qualifying property will no longer be unlimited but will instead be limited by the introduction of a new maximum allowance of £1million. This is to take effect from 6 April 2026.
Draft legislation makes provision for the £1million allowance to increase in line with indexation from 6 April 2030.
Anti-forestalling rules apply to transfers which are made between 30 October 2024 and 6 April 2026. Therefore, gifts which are made between these dates which fall into an individual’s death estate after 6 April 2026 will suffer the fate of the new £1million allowance.
For those considering settling trusts now, the £1m allowance will be shared between all trusts created by the same settlor. The allowance will be allocated to such trusts in the chronological order in which they were established. However, for trusts settled before 30 October 2024 which contained qualifying agricultural or business property, this rule will not apply and each trust will have its own £1m allowance.
For relevant property trusts, whether settled before 30 October or after 30 October, which hold agricultural property or relevant business property, a £1m allowance will be available for each ten year anniversary charge and on exit charges so that 100% relief will be available on up to £1m of qualifying agricultural or business property when it is distributed from a trust, irrespective of when this occurs within a ten-year period. However, any £1m allowance which is used against an exit charge will reduce the maximum allowance that is available at the next ten-year anniversary.
HMRC Documents can be found at Reforms to agricultural property relief and business property relief – GOV.UK
Things to consider doing now:
- Work with Ellacotts to quantify your Inheritance Tax exposure
- Consider your family’s long-term plans
- Consider the strategies available to help achieve your family’s long-term plans. These
include (but are not limited to):- Consider making outright gifts – but be aware that if you die after 6 April 2026, the new allowances will apply.
- Consider how trusts may be used to help plan against your Inheritance Tax exposure
If you would like further information or any advice on this article, please contact your Ellacotts contact or contact us by emailing solutions@ellacotts.co.uk or call us on 01295 250401. You can also contact us here with your query, and we will get back to you.
Information for readers: This material is published for the information of clients. It provides only an overview of the regulations in force at the date of publication, and no action should be taken without consulting the detailed legislation or seeking professional advice. Therefore, no responsibility for loss occasioned by any person acting or refraining from action as a result of the material can be accepted by the authors or the firm.
