Are you impacted by the changes to business property & agricultural relief?
The 2024 Budget has introduced sweeping changes to inheritance tax (IHT) reliefs, particularly affecting how agricultural and business assets are passed down through generations. With new caps on agricultural property relief and business property relief, understanding these changes is important for effective estate and IHT planning.
Read this article to learn about these changes and to understand how you could mitigate the impact of the changes to agricultural relief.
Related reading: Can I gift my home to my children to avoid inheritance tax?
What you will learn in this guide
- The mechanics of the new £1 million combined relief cap
- Critical implications for agricultural estates and family farms
- How AIM shares are affected by the reforms
- Strategic approaches to family business succession
- Methods to protect valuable assets from IHT
- Effective business asset restructuring strategies
- The importance of professional IHT planning
Related reading: Budget 2024 & inheritance tax changes
Understanding the reforms to agricultural and business property relief
The Budget 2024 marked a watershed moment for IHT planning, particularly in how agricultural and business assets are treated.
For the first time, both agricultural and business property reliefs will share a combined cap. As a result, this fundamentally changes how estates with substantial farming or business interests must approach their tax planning.
Business property relief: Key changes
Let’s now walk through the changes to business property relief announced in this year’s budget.
The new £1 million cap
From April 2026, business property relief will face a strict £1 million cap per estate.
This means estates can only claim relief on the first £1 million of qualifying business assets, with any excess value becoming subject to inheritance tax.
Combined relief structure
The introduction of a shared £1 million threshold between business and agricultural property reliefs represents a significant shift in policy.
Estates holding both types of assets must now carefully balance their holdings to make use of all available reliefs.
AIM share reforms
Previously unlimited AIM share relief has now been brought under the £1 million combined cap. This change particularly impacts investors who have traditionally used AIM shares as an IHT planning tool.
Focus on protecting smaller businesses
While these changes aim to protect smaller family enterprises, larger businesses face new challenges in managing their inheritance tax exposure.
Agricultural property relief – key changes in the Budget
Now, let’s guide you through the changes to agricultural property relief in the Budget 2024.
The £1 million threshold
Starting April 2026, agricultural property relief will operate under the new £1 million cap. This affects how farming families can protect their agricultural assets from inheritance tax.
Taper relief benefits
A new taper relief system may help soften the impact on agricultural assets exceeding the cap, providing some relief on values above £1 million.
Qualifying agricultural use
The fundamental requirement for agricultural use remains unchanged, ensuring that genuine farming operations continue to benefit from relief.
Inheritance planning considerations
If the above is cause for concern, here are some areas where you could still reduce your IHT.
As a result, engaging a professional inheritance tax adviser could
Asset restructuring
- Consider redistributing ownership among family members
- Explore partnership structures to optimise relief
- Review trust arrangements to protect assets
Related reading: Using trusts to reduce or avoid inheritance tax
Lifetime planning
- Implement early gifting strategies
- Use the seven-year rule to your advantage
- Consider a phased transfer of assets
Related reading: Understanding the seven-year rule for inheritance tax
AIM shares
The treatment of AIM shares has undergone significant reform, with these investments now falling under the combined £1 million cap. This requires investors to reassess their IHT planning strategies, particularly for portfolios heavily weighted in AIM shares.
Summary of the changes to business property and agricultural relief
New IHT caps on agricultural, business, and AIM shares relief mean high-value estates will face new planning challenges. Reviewing and restructuring how these assets are held can reduce your IHT burden, ensuring your business or farm can pass smoothly to the next generation.
Factors to consider
- The total value of your agricultural and business assets
- How the relief caps impact your estate
- Succession planning for family businesses
- Legal and tax compliance for relief strategies
- The role of a professional adviser in complex estate planning
Related reading: What does an estate planner do?
FAQs – recap on the key points
Here is a short selection of questions you may have after reading this article.
What is the new cap for agricultural and business property relief?
The cap is now set at £1 million for agricultural and business property relief. Assets above this threshold may be subject to IHT. For example, a £1.5 million family farm would see £500,000 potentially taxed, impacting inheritance for future generations.
Are AIM shares still exempt from IHT?
AIM shares are no longer fully exempt. If the value exceeds £1 million, the relief now has a 20% IHT rate with a 50% reduction. For example, a £1.2 million AIM portfolio would only receive full relief on the first £1 million, with the remaining £200,000 subject to partial IHT.
How can I manage family business assets to reduce IHT?
Consider trusts or restructuring ownership to retain as much IHT relief as possible. For example, transferring shares in a family business into a trust can help control the estate’s taxable value and ensure compliance with the new cap on reliefs.
Will all business properties be affected by the relief cap?
Yes, the £1 million cap applies to all eligible agricultural and business assets. If you have multiple properties or valuable business assets, some might fall under IHT, so reviewing how they’re structured is key. For instance, large estates may need strategic restructuring.
Can lifetime gifts of business assets reduce IHT?
Yes, lifetime gifts reduce your estate’s value. For example, if you gift a £200,000 stake in a business to a child now, it’s removed from the estate calculation. After seven years, the gift is fully exempt, reducing the estate’s taxable value under the new cap rules.
Are trusts effective in protecting business assets?
Trusts can help keep high-value business assets out of your estate, reducing IHT. For instance, placing part of a family farm into a trust allows control over asset distribution while keeping it separate from estate calculations. Proper setup is essential to maximize effectiveness.
Should I consult an adviser for these changes?
Yes, this could be a sound move. An adviser can help you navigate new relief caps, and structure your estate to minimise taxes. For example, an adviser could help structure business ownership or set up trusts to ensure compliance with the new IHT caps, protecting more wealth for beneficiaries.
External resources
Agricultural property relief – what you need to know (NFU)
What’s the beef with farmers’ inheritance tax? (Sky News)
Business relief for inheritance tax (GOV.UK)
