Entity Setup
Entity Setup and Trust Reliefs Post-2024 Inheritance Tax Reforms
Recent changes to Inheritance Tax reliefs, especially for agricultural and business-property reliefs affecting trusts, mean entity setup matters more than ever for wealthy estates.
By NomadicTax Research Team • 5-8 min read • November 23, 2025
## What has changed for IHT reliefs and trusts?
- From **6 April 2026**, reforms will limit **business property relief (BPR)** and **agricultural property relief (APR)** to **100% relief** on the first **£1 million** of combined qualifying property, then **reduce to 50%** on amounts above that threshold. ([gov.uk](https://www.gov.uk/government/consultations/reforms-to-inheritance-tax-reliefs-consultation-on-property-settled-into-trust/outcome/reforms-to-inheritance-tax-agricultural-property-relief-and-business-property-relief-application-in-relation-to-trusts-summary-of-responses?utm_source=openai))
- Shares admitted to recognised stock exchanges but **not listed** will only receive **50% relief** even on the first £1 million, not 100%. ([gov.uk](https://www.gov.uk/government/publications/autumn-budget-2024-overview-of-tax-legislation-and-rates-ootlar/841ddc37-58e0-4d3f-9b53-123e8903d274?utm_source=openai))
- Trusts are specifically affected: the way reliefs apply to AP and BP reliefs in trusts has been reviewed, especially where property is settled into trusts. ([gov.uk](https://www.gov.uk/government/consultations/reforms-to-inheritance-tax-reliefs-consultation-on-property-settled-into-trust/outcome/reforms-to-inheritance-tax-agricultural-property-relief-and-business-property-relief-application-in-relation-to-trusts-summary-of-responses?utm_source=openai))
## Why entity structure and trusts should be reviewed now
- If you hold farms or business assets in trusts, or plan to create trusts, changes in relief values could increase tax exposure on entry charges, ongoing trust charges, and when assets pass on death.
- Assets above £1 million might receive less favourable relief — so large estates need careful structuring.
- Choice between direct ownership versus ownership through trusts or corporate wrappers becomes central to optimizing for inheritance tax outcomes.
## Illustrative examples
| Situation | Under old rules | Under new rules |
|---|---|---|
| The Smith family trust holds farm land valued £1.5 million | Qualifies for 100% APR on entire value | First £1 million at 100% APR/BPR; remaining £500k gets only 50% relief — large portion taxed if trust meets thresholds and recipient triggers charges |
| John owns shares in an unlisted company via a trust | Previously full 100% relief possible | If shares classified ‘not listed’ even if recognised exchange listing, relief drops to 50% on values above £1 million or for shares not listed fully |
## Practical steps when setting up entities or trusts
1. **Evaluate asset values and relief eligibility** before creating trusts** – both APR and BPR depend on type of asset, listing status, and total value.
2. **Consider timing** of transfers or settlements: moves into trusts made before 6 April 2026 may retain older, better relief rates.
3. **Tailor trust terms** to minimize charges: match trustees, settle control, avoid unnecessary entries that trigger liability.
4. **Get valuations** accurately, especially for unlisted shares or agricultural land — errors in modern valuations can lead to loss of relief or surprise IHT charges.
5. **Use reliefs wisely**: married couples, gifting strategies, lifetime transfers might shift exposure depending on relief caps. And remember nil rate band, residence nil rate band thresholds also matter.
## Compliance & reporting tips
- Trustees should start reviewing trust deeds and beneficiary letters now, ensuring they capture recent relief changes and tax obligations.
- Be ready for HMRC statistics and reporting on reliefs: expectation of greater scrutiny of large trusts.
- Ensure your advisors are up to speed: recent consultation documents indicate HMRC keen to close loopholes, especially for untaxed trusts and property reliefs.
## Take-away for entity setup
The period between now and April 2026 is a strategic window to evaluate trusts, relief eligibility and how best to position assets to minimise inheritance tax exposure. These changes emphasise that structure, value thresholds, and relief status will be key movers of tax liabilities. Make use of valuations, professional advice and clean documentation to manage these shifts smartly.