Business Property Relief and Agricultural Property Relief remain valuable despite future changes

Business Property Relief (BPR) and Agricultural Property Relief (APR) can significantly reduce inheritance tax (IHT) payable when a person dies, or in some instances, when assets are gifted to another person or to a trust during their lifetime.

Despite changes announced in the 2024 Autumn Budget, BPR and APR remain valuable tax reliefs.

Under the current rules, BPR reduces the value of a gift of ‘relevant business property’ for IHT purposes. Subject to various conditions, the relief is given at either 100% or 50% depending on the type of asset, with no cap on the value of assets relieved.

100% relief broadly applies to:

• Sole trade businesses or interests in qualifying partnerships or LLPs, and
• Shares in unlisted companies.

50% relief applies to:

• Shares or securities giving control of listed companies, and
• Land, buildings, machinery and plant owned by the taxpayer but used by a company controlled by the taxpayer or a partnership of which they are a partner.

APR also reduces the value of a gift of agricultural property – at agricultural value only, so not taking into account any development or “hope” value – again at rates of 100% or 50% depending on the type of asset.

In the Autumn Budget 2024, the government announced that from 6 April 2026, the full 100% relief for BPR and indeed for Agricultural Property Relief (APR) will be limited, with the 100% rate of relief only applying to the first £1million of combined agricultural and business property and any value above receiving relief at a reduced rate of 50%. These new rules also apply for lifetime gifts made on or after 30 October 2024 if the donor dies on or after 6 April 2026 but within seven years of the gift.  It therefore follows that whilst these reliefs will be significantly less generous than at present, the 50% rate of relief will still be valuable for individuals holding qualifying assets.

‘Relevant business property’ could refer to a business which is carried on with a view to a profit and must not consist wholly or mainly (ie more than 50%) of dealing in securities, stocks or shares; dealing in land or buildings, or making or holding investments.

In other words, the business must be more ‘trading’ than ‘investing’. Also, the business or company must not be in the process of liquidation or winding up or subject to a binding contract for sale, and the asset must usually have been owned by the transferor for at least two years.

Lucy de Greeff, Director, and a member of the firm’s Land and Rural Practice Group, says:

“Generally speaking, a business investing in properties and letting them out would not qualify for BPR as it would consist of making or holding investments. However, if a farming business had a few surplus properties that it let out, BPR may still be available for the business as a whole, including the value of the let property, if the business doesn’t consist ‘mainly’ of the making of investments.

“There is considerable case law to help determine the difference, although the facts of each case often vary.  Advice should therefore always be sought in relation to the availability of reliefs.”

Other factors for consideration in relation to BPR claims include assets not used in the business, surplus cash considered by HMRC to be excessive for the business’ current or future needs, debts used to buy or improve BPR assets, and lifetime gifts.

Lucy says:

“APR may also be available on gifts of land occupied for the purposes of agriculture, along with appropriate buildings and farmhouses. It’s important to consider both APR and BPR and where they might apply. Sometimes both APR and BPR may be available on the same property, whilst in other cases only one of the reliefs may be available.”

The information above is based on law and HMRC practice at 18 March 2025 and includes changes announced by the government which are not yet law.  Given that the rules relating to both APR and BPR will change significantly from April 2026, we advise that succession plans should be reviewed now to minimise and plan for IHT in the light of those forthcoming changes.

For further information, get in touch with Lucy de Greeff.