The chancellor's announcement that agricultural property relief (APR) and business property relief (BPR) will be restricted from April 6 2026 sent a shockwave through the rural and business-owning community.
Changes to APR and BPR have been mooted before.
The recent Institute for Fiscal Studies report in April suggested a capping of the reliefs, and there has been talk about their possible restriction or removal for a number of years.
However, this still felt like a seismic moment. There have always been strong and longstanding policy reasons for the retention of APR and BPR, with them being seen to operate to ensure that businesses can remain intact and capable of being passed to the next generation.
There are family farms, estates, and businesses that have been owned for generations.
Owners view themselves as custodians – they work, preserve and improve the assets for their lifetime, try to keep them operational and intact, and then pass them on so that the next generation can continue to deliver value for the greater good (often as wealth creators, food producers, and employers).
Ownership of these assets is also accompanied by commercial risk, economic pressure and expense, with significant investment required on a daily basis.
The farming community is understandably concerned by the changes, with fears that the measures will be catastrophic for an industry that is already facing significant challenges.
The National Farmers' Union president, Tom Bradshaw, has suggested that his organisation will continue to lobby strongly over the coming weeks and months for a review of the restriction of APR and BPR.
There is a feeling that the rural community really wants to communicate to the government what this will really mean for their family farms and, indeed, for the rest of us. One suspects that the debate will rage for some time.
From an advisory perspective, we await the detail of how these changes to APR and BPR will work in practice – there is no draft legislation as yet. However, faced with impending change, minds are focusing on what can be done to plan ahead.
Lifetime giving and planning for succession
There are options to explore. The Budget made no mention of amendments to the seven-year rule for gifting assets for inheritance tax where the value of assets fall out of the IHT net if they are given away with no strings attached and the donor survives seven years.
Capital gains tax gift holdover relief, which can apply to business assets and agricultural assets in the right circumstances, was also untouched – this can help facilitate lifetime planning without generating a CGT liability.
Combined, these remain two valuable estate and tax planning tools for business owners.
Transfers into trust – prior to April 6 2026 with 100 per cent APR/BPR and in the hope of surviving seven years – may be a valuable tax planning tool, and we are expecting this to be an attractive option for business owners who currently own shares or business interests that qualify for 100 per cent BPR, particularly if they are considering exiting or selling their business.
