10 weeks to 5th April 2026
When the upcoming Inheritance Tax (IHT) changes were first announced in October 2024, the 5th of April 2026 (regarding changes to Business and Agricultural Property Relief, BPR/APR) and 5th of April 2027 (for changes to Pensions) seemed far enough away that we had ample time to reflect, take advice and put appropriate tax planning in place.
However, as they say, “time flies”, and there are now only 10 weeks until 5th April 2026 when the BPR / APR changes take effect.
The remaining time seems short enough without also factoring in that IHT planning is rarely a straightforward decision as it involves the family and the business, which can often mean that the difficult decisions are avoided, or put on hold
The main change coming into effect on 6th April 2026 is that 100% BPR/APR will be capped at £2.5 million, with only 50% relief available on the combined value over £2.5m. The 100% relief on the first £2.5m will be transferable between spouses meaning that provided ownership of the assets is structured appropriately, a married couple may qualify for up to £5m IHT relief at 100% on the second death.
However, many businesses and farms are worth considerably more than the 100% cap being introduced. Meanwhile a gift of Business or Agricultural assets to a Discretionary Trust prior to 6th April 2026 will qualify for 100% IHT relief, but a gift of the same assets post 6th April 2026 will only qualify for 100% IHT relief up to the £2.5m cap.
Whilst there is also a potential IHT saving if assets are gifted to individuals (reducing the value an estate), there may be other family/personal reasons why you are not in a position to make an outright gift to a specific individual at this time.
Trusts can have a broad category of potential discretionary beneficiaries, and as trustees of your trust, you can have control of the trust property and may even add other beneficiaries to the trust in the future. No discretionary beneficiary has an absolute interest in the assets in the trust. This allows some control over the trust asset, while being flexible enough to meet changing wishes or views as time progresses.
There is a lot to consider in a short space of time.
But the important point is to act now if you are considering gifting business or agricultural assets from your estate.
One final note regarding retaining assets in a trust – there are additional tax considerations, such as calculation of exit and principal tax charges. Professional advice should always be taken in relation to your individual circumstances.
Contact Angela Keery (angela@hnhpartners.co.uk) or Mark Hood (Mark@hnhpartners.co.uk) if we can be of any assistance to you with your IHT planning.