Is your business ready for changes to Business Property Relief?
First announced in last year’s Autumn Budget, the changes to Inheritance Tax (IHT) are set to come into effect from April 2026.
One of the changes that is set to cause some concern among business owners is the change to Business Property Relief (BPR).
There is increasing concern that business owners are unaware of the changes and may be set to walk into a tax trap.
What has changed with Business Property Relief?
The main change to BPR is the introduction of a cap on the availability of 100 per cent relief to the first £1 million.
For any assets that qualify above that threshold, the relief rate falls to 50 per cent.
A lot of the spotlight concerning IHT reforms has focused on the changes to Agricultural Property Relief (APR) and the impact that it will have on farmers.
This has led to growing concerns that the impact on business owners is being overlooked and that business owners may be running out of time to respond accordingly.
These were the concerns that were voiced recently at a House of Lords committee, where the possibility of delaying the changes was raised.
The lack of awareness of the changes to BPR, coupled with a perceived disparity between the impact of the changes and the revenue they will generate, was cited as a reason for a potential delay.
However, with the economic black hole that needs to be filled, it is unlikely that the Chancellor will walk back any changes that are likely to increase revenue, no matter how small that amount may be.
How should businesses prepare for changes to Business Property Relief?
As with all changes to IHT, it is now necessary to evaluate the way that your estate is structured to ensure that it remains as tax-efficient as possible.
Unlike farmers who tend to be cash poor but asset rich, business owners may have a greater scope to restructure the business or leverage gifting to ensure that their eventual IHT bill is kept low.
If your business is valued at over £1 million, you need to be aware that it could push your estate over the IHT threshold and therefore have an impact on your financial legacy.
To know whether the BPR changes will impact your business, it is time to get an independent valuation.
The increased need for valuations was a point of concern raised in the House of Lords committee, as there were concerns that HM Revenue and Customs (HMRC) were ill-prepared to meet such a demand.
We can help you understand the ways that your estate may be impacted by the value of your business.
While restructuring might be necessary, we would hope that the changes to BPR do not put off business owners from growing their businesses.
Instead, it is best to view the changes to BPR as another challenge that can be tackled with the support of expert accountants.
Ultimately, there is still time to make adjustments in preparation for the BPR changes, but action needs to be taken sooner rather than later.
For expert support and guidance to help you manage BPR and other financial concerns, speak to our team today!
