Protecting Family Wealth

With the announced changes in relation to Agricultural and Business Property Relief coming into effect from April 2026, further consideration needs to be given in relation to the succession of businesses, and potential exiting planning routes.

One common option for owner managed businesses to ensure continuity of their business, in a tax efficient manner, was to pass the business onto the next generation on death. Which before April 2026 is covered by business property relief for the full value, so no inheritance tax payable, with the benefit that base cost of the business being uplifted to the value at death on the eventual sale.

The changes announced have significant implications for estate planning and may alter people’s approach to succession planning if the desired option is to transfer ownership on death. Agricultural Property Relief and Business Property Relief have been capped at 100% relief for £1m of combined asset value. Anything above this threshold will now benefit from only 50%, so an effective rate of tax of 20% on death.

As a result, farmers and business owners may need to consider making gifts during their ownership to reduce inheritance tax on death. The donor of the gift needs to survive 7 years for the gift to fall outside of their estate for inheritance tax planning, and therefore business owners are considering transferring assets earlier than expected.

This approach however may not be viable in some instances as the recipient may not be ready to manage the business, the age profile of the donee does not accommodate this approach, early gifting could create other financial implications, so other options to exit the business may need to be considered.

For those parties where early gifting is a viable option, this could however create other implications, namely is the recipient of the business married, and is there a risk that family value is transferred in the event of a divorce?

Pre-nuptial (and post nuptial) agreements are not enforceable as contracts in courts in England and Wales, however in the landmark case of Radmacher v Generation the supreme court ruled that courts should uphold nuptial agreement freely entered into by both parties. These agreements are not something we as a firm can execute, but working with your legal advisers as part of succession/exit planning to ensure family wealth is protected, these could be a consideration.