You would be hard-pressed to find many people celebrating after the 2025 Autumn Budget.
For business owners and farmers, the doom and gloom started in the previous year’s Budget with the introduction of limits to the efficiency of Agricultural Property Relief (APR) and Business Property Relief (BPR).
The thresholds have now been updated and it is worth understanding how it will impact you.
What is changing with APR and BPR?
The previous generosity of APR and BPR was dramatically undercut when it was announced in the 2024 Autumn Budget that the 100 per cent relief would be capped.
Back then, the cap was announced at £1 million, with anything above that value would only receive 50 per cent relief.
As was apparent from the waves of protests the decision sparked, the move was extremely unpopular with farmers.
This is largely due to farmers being asset-rich without having a great amount of working capital to help tackle Inheritance Tax (IHT) bills.
It is also unreasonable to expect farmers to lose some of their high-value assets when they may be the very thing needed to keep the farm going.
Business owners found themselves in similar positions where they would either shackle their families to IHT or risk devaluing the business while they were alive.
One of the slight positives to come from the 2025 Autumn Budget was the announcement that the allowance could be passed on to surviving spouses or civil partners.
Importantly, the relief could be passed along even if a spouse or civil partner died before April 2026.
This has now been followed by what seemed like an attempt to spread some festive cheer.
On one of the last days of the year, the Chancellor announced that the threshold for APR and BPR will be increased to £2.5 million when the changes take effect on 6 April.
This means that a couple will be able to pass on up to £5 million of agricultural or business assets between them, on top of the existing allowances such as the nil-rate and residence nil-rate band.
How should I prepare for these changes?
The increased threshold is welcome and excellent news for those worrying about IHT.
However, it is still a downgrade from the current generosity of APR and BPR.
This means that estate planning remains vital, particularly as unspent pension pots are set to be dragged into IHT calculations from 2027.
Mercifully for those hoping to keep IHT down, gifting was not targeted at all during the Autumn Budget.
It was feared that some changes would see gifting lose its value, but it remains the most effective way of lowering the risk of IHT.
Any gifts given seven years before your death will not be included in IHT calculations.
Gifts are taxed at a tapered rate in the interim, so there is still value in being generous while you are still alive.
Of course, not every asset can or should be gifted, which makes it important to seek professional advice and support.
We can help you understand your tax obligations and the value of your estate, allowing you to gain better control over the money you leave behind.
You have worked hard to get where you are now and it is only right that your loved ones get to feel the benefit.
