Welsh farmers and business owners are being urged to plan for the long term to avoid incurring ‘significant inheritance tax liability’ due to an overhaul of Agricultural and Business Property Relief (APR/BPR).
Shaun Thomas, an inheritance tax specialist at Cardiff-based legal and professional services business Knights has urged business and farm owners to undertake a review of their succession planning in light of changes to inheritance tax rules for APR and BPR which come into effect next month.
From 6 April 2026, only the first £2.5 million worth of qualifying business and agricultural assets will receive 100% inheritance tax relief, which under the current rules is uncapped. This means that while beneficiaries of a will shall receive 100% inheritance tax relief on any qualifying assets up to £2.5 million, they will be liable to effectively pay 20% inheritance tax on any qualifying assets exceeding the threshold when the assets are transferred.
While this does mean the scope to reduce future tax liabilities has been limited by the introduction of the £2.5 million cap on 100% relief, Shaun says it’s “more important than ever before” that owners have plans in place to shield their estates from a future tax bill that could jeopardise the ‘long-term viability’ for some farms and businesses.
Shaun Thomas, Private Client Partner at Knights, said:
“These changes mean businesses and farms face an inheritance tax liability they never had to consider before and that unfortunately could make some unviable, so it's important that both business owners and farmers alike think about their position as early as possible so that any succession planning can be implemented effectively.
“It's certainly not a cliff edge once 6 April comes around and businesses and farmers don’t have any opportunities; the opportunities very much remain. It's all about looking at the wider picture, looking what is suitable for that individual, that family, that business and that farm, and coming up with a plan that both covers their succession wishes but also mitigates that exposure.
“If you speak to any business owner or farmer, they want to build their legacy for their children and grandchildren and further generations. By planning effectively, owners can satisfy those wishes not just for themselves now, but also further down the line for children and grandchildren.
“So it's vitally important that those who have not necessarily had to look at their succession planning or had to look at their inheritance tax planning before because, and quite rightly, they had full inheritance tax relief on their assets, they do so now because no one wants to be left in a position where a business or farm suffers the consequences down the long run.
“It’s also important that owners consider their business’ growth trajectory, because even if their assets right now aren't valued near to the £2.5 million cap, growth could explode what they've worked towards would then incur a much larger inheritance tax bill further down the line.
“Now is a really crucial point in time for business owners to get their succession planning in order so that hopefully, when the time comes, their estates are in the best possible position, and their legacy can continue for generations to come.”
