It's Not Just Farms! Do You Understand the Impact of BPR Changes on Your Business?

Recent reforms announced in the Autumn Budget 2024 are set to shake things up!

There are some important changes to Business Property Relief (BPR) and Agricultural Property Relief (APR) under UK inheritance tax (IHT) rules coming your way.

The media has been focused on how farmers will be affected and their protests against the reforms but did you know that these changes could affect your company's financial future too?

It's crucial to understand how these changes might impact your business.

What's Changing?

Starting from 6 April 2026, the government is introducing caps on BPR and APR.

Currently, these reliefs can provide up to 100% exemption from IHT on qualifying business and agricultural assets, with no upper limit.

However, under the new rules:

• £1 Million Cap: The first £1 million of combined qualifying business and agricultural assets will continue to receive 100% relief.

• 50% Relief Beyond £1 Million: Any value exceeding the £1 million threshold will qualify for only 50% relief.

This means that if your business assets total £2 million, the first £1 million could be exempt from IHT, but the remaining £1 million would only receive 50% relief, potentially leaving a portion subject to IHT at the standard rate.

Why Does This Matter to You?

You might be thinking, "I don't own a farm, so this doesn't concern me."

But hold on! These changes aren't limited to agricultural properties.

They affect all qualifying business assets, including shares in unquoted trading companies, partnerships and more.

If you own a small or medium-sized enterprise (SME), these reforms could have significant implications for your estate planning and the future financial health of your business.

AIM Shares Affected Too

Investors in AIM-listed companies, need to take note.

Under the new rules, shares listed on non-recognised stock exchanges, such as AIM, will see a reduction in relief from 100% to 50%, regardless of the value.

This change could impact your tax planning strategies if you hold such investments.

How Will This Impact Your Business Succession Planning?

Succession planning is vital for ensuring the longevity of your business.

With the upcoming changes:

• Increased IHT Liability: Your heirs might face higher IHT bills, which could necessitate the sale of business assets to cover the tax liability.

• Cash Flow Considerations: The need to pay IHT could strain your company's cash flow, affecting operations and growth.

• Trusts and Multiple Estates: If you have multiple trusts or estates, the £1 million cap applies across all, potentially complicating your tax planning.

What Should You Do Next?

1. Review Your Assets: Assess the current value of your business and agricultural assets to understand how the £1 million cap might affect you.

2. Consult with Professionals: Engage with accountants who can provide tailored advice based on your specific circumstances.

3. Update Your Estate Plan: Ensure your estate planning documents reflect the upcoming changes to optimize tax efficiency.

4. Consider Alternative Strategies: Explore other tax reliefs or planning opportunities that might mitigate the impact of these changes.

   
   

Final Thoughts

Tax laws are complex and ever-changing.

Staying informed and proactive is the best way to protect your business and ensure a smooth transition when these reforms take effect.

Remember, these changes are set to commence on 6 April 2026, so there's time to plan but don't delay.

If you have any questions or need personalised advice, feel free to reach out to us.

We're here to help you navigate these changes and secure your business's future.

This blog is for information purposes only and does not constitute tax, financial or legal advice. Please consult with a professional advisor for advice tailored to your specific circumstances.