Will the proposed changes to inheritance tax reliefs be delayed?

The Environment, Food and Rural Affairs Committee recently published its report on the Government’s Vision for Farming. The report is generally supportive of the direction of the government’s policy for farming, to include the aim of preventing wealthy investors from accessing inheritance tax (IHT) relief for investing in farmland via agricultural property relief (APR).

That said, the committee members state they “are concerned, however, that no consultation, impact assessment or affordability assessment was conducted before the announcement of the reforms.” As a result, the committee recommends that the government undertakes this research now, and pushes back final announcements on the scope of proposed changes until October 2026, for the legislation to take effect from April 2027.

It's important to highlight that any delay in the implementation of the new rules is likely to affect all business owners where business property relief (BPR) is in point. The report rightly focuses on farmers given the scope of the committee, but BPR has a much wider application in the privately owned business world. BPR can be available for sole traders, trading partnerships and unlisted trading companies.

Business succession is complex, both technically and from a family dynamic perspective. It can take a long time for a family to work through their plans and agree the longer-term direction of travel for the business. Passing on a business can be akin to a grieving process for some business owners who have dedicated their life to the business and their employees.

The process of letting go of something that has been so central to their life can be lengthy and stressful. Once the big picture has been determined, business owners need to make the right decisions regarding structuring for governance, control and protection. A delay in the implementation of the IHT changes will provide these families with a little more breathing space in what can often be an emotionally charged transition.

It remains to be seen whether the government will accept the recommendations of the committee, and give business owners another year to plan for succession. Some may argue that a one-year delay in implementing the changes is likely to have little practical impact on the urgency with which those affected should be considering their options, given that most gifts only escape the IHT net after seven years. Therefore, even if the rule changes are delayed until April 2027, it’s important that private business owners and farmers seek advice now on how changes to BPR and APR may impact their succession plans.