The recent Budget has ushered in sweeping changes to the tax landscape, with significant implications for farmers, family businesses, and larger estates.
Set to take effect between 2025 and 2027, reforms to Agricultural Property Relief (APR), Business Property Relief (BPR), and the inheritance tax (IHT) treatment of pensions represent a fundamental shift in how assets are taxed and transferred across generations.
For landowners, business owners, and families, these changes underscore a need for effective succession planning to safeguard assets and mitigate exposure.
From April 6 2025, APR will expand to cover land managed under environmental agreements with UK and devolved governments, public bodies, local authorities, and approved responsible organisations.
This extension reflects the increasing emphasis on sustainable land use and encourages landowners to participate in conservation efforts.
Under the new regime, APR relief will be capped, meaning combined agricultural and business property will qualify for 100% relief only up to £1 million. Any value beyond this threshold will be subject to just 50% relief.
Many agricultural families with larger estates are likely to face significant IHT liabilities.
This comes at a time of heightened uncertainty for the farming community, marked by protests and growing concerns over economic viability. For many, the tax changes exacerbate the challenges of maintaining intergenerational continuity.
Proactive planning, whether by restructuring holdings, exploring trusts, or other measures is critical to protecting the future of farming enterprises.
BPR, long a cornerstone for preserving family businesses, is also facing reductions that will leave more estates exposed to IHT. These changes come alongside mounting operational pressures, from rising employers’ national insurance costs to inflationary challenges, making it harder for business owners to focus on succession planning.
However, deferring action is risky. By proactively seeking professional advice at an early stage, business owners can address both immediate operational concerns and long-term strategic objectives.
Whether revisiting company structures, exploring investment strategies, or planning for leadership transitions, professional advice can provide necessary clarity.
Perhaps one of the most significant shifts is the inclusion of unused pension funds in IHT calculations from April 2027. Historically, pensions held within trust were exempt from IHT, making them a popular vehicle for asset transfer. The removal of this exemption fundamentally changes the role of pensions in estate planning, creating new liabilities that could impact families’ financial stability.
Alternative strategies, such as creating family trusts, are becoming more attractive. Trusts can enable assets to be managed and transferred across generations while offering protection against IHT exposure. The flexibility and control they provide also make them a valuable tool in light of the coming changes.
We are already seeing a surge in clients reviewing their affairs ahead of the changes, and in the face of these unprecedented shifts, one thing is clear: careful planning is not just advisable, it is essential.
By acting now, individuals and businesses can take advantage of opportunities to restructure their holdings, utilise trust arrangements, and implement tailored strategies to reduce exposure.
- Barry McDonough is associate at Arthur Cox
