Recent Reforms and What They Mean
Agricultural and Business Property Reliefs (APR & BPR)
- From 6 April 2026, agricultural property relief and business property relief are reformed: the 100% relief remains for the first £1 million of combined business and agricultural assets, but above that threshold relief drops to 50%. (gov.uk)
- The £1 million allowance will be transferable between spouses or civil partners, helping estate planning. (gov.uk)
Business Asset Disposal Relief (BADR) & Investors’ Relief
- These reliefs will see their Capital Gains Tax rate increase to match the lower main rate of 18% starting 6 April 2026. (gov.uk)
Carried Interest Regime Overhaul
- From 6 April 2026, carried interest income will sit fully within the Income Tax framework, moving away from CGT treatment. (gov.uk)
Inheritance Tax (IHT) & Trust-Related Anti-Avoidance
- Budget 2025 included anti-avoidance measures targeting non-long-term UK residents and trusts. These ensure more equal treatment for overseas owners, especially of agricultural property. Effective from Budget Day for certain gifts or deaths, and fully from 6 April 2026. (gov.uk)
Who Is Affected?
- Trustees and personal representatives managing estates.
- Non-UK residents owning UK agricultural or business property via trusts or offshore structures.
- Individuals with business/agricultural assets exceeding £1 million in value.
- Those using carried interest (e.g. in private equity) for tax planning.
Practical Considerations and Planning Opportunities
- Estates expecting to exceed the £1 million threshold might benefit from making lifetime gifts before 6 April 2026, or restructuring property holdings.
- Spousal transfers may utilize the new transferable allowance; plan together where both partners hold assets.
- For carried interest, review how compensation is structured in partnerships/funds—may shift payout timing or entity classification.
- Non-residents should assess trust structures and ownership, as offshore arrangements may face equalisation and trust exit charge reforms.
Example Scenario
Scenario A: A farming couple hold £1.5 million in business and agricultural assets. Under new rules, first £1 million gets 100% relief; next £0.5 million only gets 50%. Without careful planning, that could introduce a significant IHT liability. Spousal transfer of some assets before the change could preserve more relief.
Scenario B: A fund manager receives carried interest payments handled through a structure giving CGT treatment. From April 2026, this income will be taxed as income tax—likely increasing the tax rate and affecting net returns.
Key Action Steps Before April 2026
- Identify asset values and ownership structures now
- Seek valuations if necessary
- Consult with a tax adviser about trust or non-resident status
- Review agreements related to carried interest or other tax-advantaged income streams
- Consider gifting or transferring assets prior to the new rules if feasible
These reforms represent some of the most substantial shifts in UK wealth and estate taxation for years. Early planning is essential.