Since the changes to Agricultural Property Relief (APR) and Business Property Relief (BPR) were announced in the 2024 Autumn Budget, many individuals have had to rethink their estate planning.
It came as a surprise to most people when the Chancellor recently announced changes to the thresholds before they had even taken effect.
This has left many wondering whether they will still be impacted by the new thresholds and what they can do to prepare.
Who will be impacted by the APR and BPR thresholds?
The drive behind the reforms to Inheritance Tax (IHT) was to expand the scope to cover more estates and ensure that more value can be collected from those estates.
However, there has been significant pushback on these proposals from many who feel that the Government has failed to accommodate the financial complexity of some high-value estates.
In particular, farmers seldom have the luxury of disposing of high-value assets, given that these are likely essential to operating the farm.
To dispose of these assets would be to stifle the capability of the farm in the long term and potentially would undercut the strength of the UK agricultural sector.
Many business owners found themselves in similar positions, with wealth being tied to assets rather than cash, meaning that IHT bills would prove challenging for those faced with them.
Some reprieve was given during the 2025 Autumn Budget, where it was revealed that the APR and BPR allowance could be passed on to a spouse or civil partner.
This is true even if one party died before April 2026.
While this lessened the blow of the upcoming thresholds, it was still not enough to counter some of the concerns.
As such, the Chancellor has now amended the thresholds to £2.5 million instead of the proposed £1 million, meaning that more wealth can benefit from the 100 per cent relief.
The ability to pass on relief gives couples an effective threshold of £5 million of agricultural or business assets between them, which can be paired with existing allowances such as the nil-rate and residence nil-rate band.
Ultimately, those still affected by the changes will be those whose estates surpass this threshold, wherein they will only benefit from a 50 per cent relief.
Are the changes to APR and BPR good news?
It would be difficult to describe the changes as good news when they represent a softening of bad news.
Any threshold is still less tax-efficient than the previous system of no threshold, but the amended threshold is a positive step.
The versatility that comes with being able to pass on relief also widens the scope for those who can effectively plan around the changes.
Mercifully, the Chancellor did not make any changes to gifting for IHT, so the most effective tax planning measure remains unaffected.
This is due to gifts being given seven years or more before you die falling entirely outside of the scope of IHT, with gifts given in that time being taxed at a tapered rate.
Only time will tell whether more IHT reforms will be introduced, as there are still other reforms waiting in the wings.
2027 will see unspent pension pots brought into IHT calculations for the first time, potentially pushing even more people over the IHT threshold.
Fiscal drag remains an ongoing concern as the value of assets increases on paper even as the real-world impact stays the same or, in some cases, decreases.
Effective estate planning is the best way to keep your IHT bill manageable and we are on hand to help you understand the best approach for you.
To discover whether you are set to be impacted by IHT reforms and what you can do about it, speak to our team today.
