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Following last month’s Budget announcement, business-owning and farming families are facing significant changes to Business Relief and Agricultural Property Relief, with new limitations proposed to take effect from April 2026.

These valuable inheritance tax reliefs are designed to protect family businesses and farms from inheritance tax (IHT) burdens that could otherwise impact their continuity. The potential restrictions mean that many business and farm owners are now considering lifetime transfers of assets as a strategy to protect their family legacies and reduce future IHT liabilities.

• Business Relief (BR) currently offers up to 100% relief on the value of qualifying business assets, including shares in private companies, provided certain conditions are met.
• Agricultural Property Relief (APR) also offers up to 100% relief on qualifying agricultural property, such as farmland and buildings, allowing families to preserve their agricultural holdings.

The proposed restrictions on BR and APR (Agricultural Relief and Business Relief is now being capped at £1 million, with anything over this being taxed at 20%) could reduce the scope of assets that qualify for these reliefs. Although details are still emerging, the restrictions may mean fewer assets or narrower circumstances under which relief is granted, resulting in higher inheritance tax bills for families that own business or agricultural property.

These proposed changes could also lead to a greater IHT burden for heirs, and as a result, some business and farming families may be forced to sell assets to cover tax liabilities, risking the stability of long-standing family enterprises.

With offices across Perthshire and Tayside we have experience working with many agricultural businesses and families, and their trusted advisors, including accountants, to ensure that all legal aspects of your planning are seamlessly integrated and thoroughly addressed. We can help you review your current estate structure, explore options for lifetime transfers, and ensure that your family legacy is safeguarded against upcoming IHT changes. If you are considering transferring business or agricultural assets now, in order to secure the current level of reliefs and reduce future inheritance tax exposure, it is important to consider:

• Eligibility and valuation: Ensure your assets qualify under the current BR and APR rules. Proper valuations and documentation will be essential in demonstrating eligibility and securing reliefs.
• Gift tax implications: Lifetime transfers can still attract capital gains tax (CGT) or other taxes, depending on the type of asset and the timing of the transfer.
• Retaining control: Many business owners are understandably reluctant to relinquish control over key assets. It’s possible to structure transfers in a way that provides beneficiaries with ownership while allowing the current owner to retain decision-making authority.

Effective legal structuring can help protect business and agricultural assets through family trusts or partnerships, allowing you to balance the tax benefits of transferring ownership with the need to retain family control and ensure orderly succession.

Now is the time to begin planning.