Autumn Budget - Inheritance tax reforms likely to impact food sector business owners
The 2024 Autumn Budget has unveiled significant planned changes to inheritance tax that could greatly affect food sector business owners. These changes will require business owners to plan for the future to safeguard family businesses.
Inheritance tax reliefs such as Agricultural Property Relief (APR) and Business Property Relief (BPR), are very valuable when it comes to preserving family assets for many food sector businesses. This is because they will often help to prevent inheritance tax forcing the sale of agricultural and business assets upon the death of a shareholder, allowing businesses to continue through several generations.
Under current rules, when an individual dies owning qualifying agricultural or business assets, the executor of their estate can often claim 100% relief from inheritance tax on the value of these assets, and there is no limit to the amount of APR and BPR that can be claimed.
From April 2026, the government is planning to limit the relief as follows:
100% relief will apply to the first £1million of combined business and agricultural assets owned per person
For any remaining value over £1million, the relief will be reduced to 50%
Unfortunately, this could mean that upon the death of a business owner beyond April 2026, families could be left in the unenviable position of having to sell the business to fund any inheritance tax that is payable. This will be the case unless:
The deceased leaves sufficient cash in the bank to fund the tax
The tax liability is reduced by other reliefs, such as the basic nil-rate band
One key thing to note is that the £1million limit is available per person but may not be transferrable between spouses or other family members. For example:
If a business owner dies with £700,000 worth of qualifying business and agricultural assets, the remaining £300,000 available of the £1million limit could be lost.
Therefore, it is recommended that business owners take legal advice with regards to their estate planning to ensure that these reliefs are used to their maximum potential.
To protect your food business and prepare for these changes, it is vital that you consider the following actions:
1. Ensure valid Wills are in place to make use of these allowances
2. Consider lifetime gifts or trusts. However, it must be noted that gifts and trusts are not without risks, therefore it is essential to take bespoke legal advice to figure out the options available to you
The upcoming changes could have far-reaching implications for food sector business owners. Taking professional legal advice now can help ensure your business remains secure for future generations.
If you would like advice on estate planning or the inheritance tax reforms, our specialist team at Wilkin Chapman is here to help.
Contact Amy to discuss this further.
