Latest Posts

The Final Straw? – Key Changes to Agricultural and Business Property Relief (APR and BPR) and What They Mean for the Future of Farms

Tractors descending on Whitehall, Jeremy Clarkson up in arms and landowners across the country fearing for the future of farming. So, what’s it all about? Here’s what we think farmers, landowners and business owners need to know about the substantial changes to Agricultural Property Relief (APR) and Business Property Relief (BPR), set to take effect from 6 April 2026.

What are APR and BPR?

APR and BPR are reliefs that reduce inheritance tax (IHT) on agricultural and business assets, intended to ensure that family farms can remain operational following a change of ownership. IHT is charged on transfers of value (e.g property, savings and personal belongings) at a standard rate of 40%.

• APR historically provided 100% or 50% relief on agricultural property, such as farmland or certain farm buildings, to reduce IHT on estates.
• BPR offered similar relief for business property, such as shares in a family trading business, reducing IHT on assets outside agricultural property.

What is Changing From 6 April 2026?

£1 million relief cap

Following the Government’s Autumn Budget, the proposal is that only £1 million of an estate’s agricultural and business property will now qualify for 100% relief from IHT. If an estate consists of both agricultural and business assets, the £1 million cap will be divided between the two based on their value.

The Government have stated that this is expected to affect the “wealthiest 500 estates,” however the uproar from the farming community goes some way to suggest the widespread impact this cap will have. It remains to be seen if the clamour in Westminster will be enough to prevent this change.

Let’s consider an example:

A farmer owns an estate worth £8 million which contains a farm worth £6 million and a business worth £2 million. On the farmer’s death, the estate would be subject to the £1 million 100% relief as follows (for illustrative purposes, we are assuming that there is no available nil rate band):

• • £750,000 relief for the farm (75% of £1 million).
  • £250,000 relief for the business (25% of £1 million).

The remaining £7 million of the estate will be subject to reduced relief (see below).

50% relief beyond the £1 million cap

Once the £1 million cap is exceeded, assets will qualify for 50% relief from IHT. Assets currently receiving 50% relief will not use up or be affected by the new allowance, but any unused allowance will not be transferable between spouses and civil partners. Put simply, this results in an effective IHT rate of 20% on the value of APR qualifying assets exceeding the £1 million cap.

Using the example above, the remaining £7 million on our farmer’s estate would receive 50% relief, leaving £3.50 million taxable value, or framed differently, a 20% tax on the £7 million excess.

The inheritance tax that will be owed on the estate would be £1.4 million.

This tax can also be paid interest-free, in instalments, over a 10 period, which may help ease the financial burden farmers will now face.

Lifetime transfers and trusts 

From 30 October 2024, these new caps and reliefs will also apply to lifetime transfers made within the seven years before death, if the donor dies on or after 6 April 2026. Similarly, trusts will receive 50% relief on  ten-year IHT charges and any smaller charges when property exits the trust. This may mean that farmers could transfer large parts of their estate into a “discretionary” or “interest in possession” trust now without an IHT liability arising immediately, although relevant property charges will likely arise for the trustees.. The Government will publish a consultation in early 2025 on the detailed application of charges on property within trusts.

This means that if our farmer made a lifetime gift of his £6 million farm to his children today and then died two years after making the gift, the transfer would be charged to IHT, subject to the new reliefs set out above. However, if our farmer made the gift today and died on 6 April 2032 (i.e. over seven years since making the gift) there would be no IHT liability for his children.

Changes to BPR

BPR will now apply at 50% instead of 100% for shares in businesses not listed on “recognised stock exchanges,” such as AIM (Alternative Investment Market) shares.

What Does This Mean For The Future of Farming?

For farmers and business owners, these changes to APR and BPR are certainly unwelcome. There is a divide between the farming community and the Government, with farmers arguing that the high capital value of their estates is disproportionate to the low income that they generate. Their major concern is that the Government’s reduction of APR and BPR will result in land being sold piecemeal to meet the new IHT liability. This, in turn, could lead to estates becoming unviable and farmers having to sell up altogether.

It is more crucial than ever to seek advice on wealth protection and planning opportunities as early as possible. With an understanding of what an estate consists of, there are measures, such as lifetime gifts or the formation of trusts, which could help lessen the burden that these changes will bring.

Please do contact the Private Wealth & Tax team to understand the implications for you and/or your clients.

Read More

Autumn Budget – The Quastels’ Take

Billed as a ‘once in a generation event’, the hotly anticipated Autumn Budget has been the subject of intense speculation for what seemed an eon in the private wealth sector and our clients. Looking at the announcements broadly, then, it was a Budget for which, for all intents and purposes, we prepared ourselves: large tax rises, more borrowing and commitment to increased public spending and investment.

We set out below our initial thoughts on the key proposals affecting our clients.

Non-Domiciles

The surprises came in the form of tempered measures and concessions, in attempts to stem the stampede of foreign HNWs for the departure gates at Heathrow, including:

• a tapering of the Inheritance Tax ‘tail’ on worldwide assets of between three to ten years, depending on the length of residence in the UK; and
• an extension of the ‘Temporary Repatriation Facility’ to three years, at a reduced rate of 12% for the first two years and 15% for the third year, for those who have previously claimed the remittance basis.

Although these measures are more ‘moderate’ compared to previous proposals, , the scrapping of protected status for trusts settled by non-domiciliaries, with no grandfathering provisions will not be warmly embraced.

Whether taxpayers and their advisors will agree with the Chancellor that the new residence-based regime is ‘internationally competitive’, will be evaluated more accurately through the passage of time.

Capital Gains Tax and Inheritance Tax

At the height of the pre-budget frenzy, it was speculated that Capital Gains Tax (CGT) rates would be aligned with Income Tax rates and that that various Inheritance Tax (IHT) reliefs would be removed.

Clients and their advisers gained some comfort that the rates announced for CGT (an increase of the main rate from 10% to 18% for basic rate taxpayers and from 20% to 24% for higher rate and additional rate taxpayers, to align with residential property rates) were more conservative when held up against media speculation.

Business Asset Disposal Relief and Investors’ Relief is also set to rise from next year, making it more costly for those selling their companies.

Whilst fears that Business Property Relief (BPR) and Agricultural Property Relief (APR) would be removed entirely did not come to pass, the restriction of 100% relief to the first £1,000,000 of combined business and agricultural property, with values in excess of this amount only benefitting from 50% relief from April 2026, has been met with robust responses.

For many businesses, the £1,000,000 cap is likely to be insufficient for even the smallest of operations and IHT will be an existential threat to the continuity of businesses. In sectors such as farming with high capital values and increasingly low yields, for example, it will be a real concern that IHT could lead to the breakup of farms.

Unused pensions and death benefits payable from a pension which largely sit outside an individual’s estate for IHT purposes, will also become subject to IHT from 2027.

However, the rules surrounding gifting remain unchanged for now, and it is likely that gifting onto the next generation will be accelerated and will form an important part of succession planning where feasible.

Wealth Taxes

Whilst the UK does not levy a tax on wealth per se, many may view the newly proposed levies as such.

The Government has committed to applying VAT to private school fees from 1 January 2025. VAT for the supply of services (education in this case) will be subject to where it is delivered and it is unclear whether this will deter international students from UK independent schooling due to the higher fees.

The Chancellor, in a mocking quip to the former prime minister Rishi Sunak, also confirmed a 50% uplift in air passenger duty (APD) for trips by private jet from 2027/28.

In a commitment to support first-time buyers of property in the UK, it was also announced that the Stamp Duty Land Tax surcharge on additional property will rise from 3% to 5%. This surcharge also applies to those purchasing buy-to-let residential properties.

Conclusion

It has always been crucial for HNW/UHNW individuals and families to seek advice on wealth protection and planning opportunities as early as possible. However, with unused pensions being brought into scope of IHT and the restriction of full BPR and APR subject to a cap, many who would have considered themselves to be of more moderate wealth or who have business operations, will now need to give serious thought as to gifting and succession planning during their lifetimes.

For non-domiciled individuals, the Budget has provided certainty on the abolition of the current tax regime, but it remains to be seen whether the four-year foreign income and gains regime, will be a sufficient sweetener for prospective inpatriates whom the Government hope to become long-term taxpayers.

Please do contact the Private Wealth & Tax team to understand the implications for you and/or your clients.

Read More

Autumn Budget 2024 – Key Private Client Changes

The Chancellor, Rachel Reeves, has delivered the 2024 Autumn Budget and is set to raise taxes by £40 billion. We summarise the key changes and when these are anticipated to come into force.

Stamp Duty Land Tax (SDLT)

• From 31 October 2024, there will be an increase in the SDLT rates for additional dwellings from 3% to 5%. These rates will apply to purchases of second homes and buy-to-let residential properties.
• The rate for corporate bodies and non-natural persons purchasing dwellings costing more than £500,000 will increase from 15% to 17%.

Value Added Tax (VAT)

• There will be no increase to the VAT rates which remain at 20%.
• From 1 January 2025, VAT will be applied to private education and boarding services. Additionally, from 6 April 2025 the charitable rate relief from business rates charged to private schools in England will be removed.

Income Tax

• There will be no changes to income tax or individual’s national insurance contributions (NICs).
• From 6 April 2026, carried interest will be taxed in line with income tax.
• From the 6 April 2025, Employer’s NICs rate will rise from 13.8% to 15% as well as the threshold at which NICs will become payable falling to £5,000.

Inheritance Tax (IHT)

• The inheritance tax thresholds of £325,000 (the nil-rate band) and £175,000 (the residence nil-rate band) will be fixed at the current rates for a further two years until April 2030.
• From 6 April 2027, inherited pension pots will be subject to inheritance tax.
• With effect from 6 April 2025, the scope of agricultural property relief (APR) will be extended to include land managed under an environmental agreement with, or on behalf of, the UK government, local authorities, or relevant approved bodies.
• From 6 April 2026, APR and business property relief (BPR) will be reformed. The existing 100% relief from IHT will continue to apply to the first £1 million of combined agricultural and business property. Thereafter, there will be a reduced rate applicable of 50%. A consultation is set to be published at the start of 2025 to explain how the reformed £1 million allowance will apply to qualifying assets that are held in trust.
• The rate of BPR will reduce to 50% in relation to shares designated as “not listed”, which includes AIM shares

Capital Gains Tax (CGT)

• The government has increased the lower rate of CGT from 10% to 18% and the higher rate from 20% to 24% for non-residential property disposals. This equalises the CGT rates with the current residential property CGT rates which remain unchanged. The CGT rate for trustees and Personal Representatives increases to 24%.
• Business Asset Disposal Relief (BADR) and Investors’ Relief are affected with BADR rising to 14% from 6 April 2025, and rising further to 18% from 6 April 2026. The lifetime limit on Investors’ Relief will be reduced from £10 million to £1 million on qualifying disposal made after budget day.
• From 6 April 2025, CGT charged on carried interest will increase from 28% to 32%. From 6 April 2026, a revised regime will be introduced to treat carried interest as trading profits therefore becoming subject to income tax as opposed to CGT.

Abolition of the Non-Domicile Regime

• The Government has committed to abolishing the historic non-domicile regime.
• A new regime, known as the Foreign Income and Gains regime (the FIG) will provide 100% relief on foreign income and gains for new arrivals to the UK in their first 4 years of tax residence, provided they have not been UK tax resident in any of the 10 consecutive years prior to their arrival.
• The concept of domicile will be replaced by a ‘residence’ test, based on the UK’s Statutory Residence Test.
• An individual is long-term resident (and in scope for Inheritance Tax on their non-UK assets) when they have been resident in the UK for at least 10 out of the last 20 tax years, and non-UK assets remain in scope for between 3 and 10 years after leaving the UK.
• A Temporary Repatriation Facility (TRF) will be available for individuals who have previously claimed the remittance basis.
• The TRF will be available for a limited period of three tax years at a reduced rate of 12% for tax years 2025/26 and 2026/27 and 15% in tax year 2027/28.
• The protection from tax on foreign income and gains arising within settlor-interested trust structures will no longer be available for non-domiciled and deemed domiciled individuals who do not qualify for the FIG.
• For Capital Gains Tax purposes, current and past remittance basis users will be able to rebase foreign assets they held on 5 April 2017 to their value at that date, when they dispose of them.

This is only a brief summary of the extensive changes that are coming into force. If you have any questions, please get in touch with the Private Wealth & Tax team at Quastels and we would be happy to assist.

Read More