By Jonathan York, Armstrong Watson
THE impact of the Autumn Budget for our farmers and the implications of the fundamental changes to agricultural and business property reliefs for Inheritance Tax (IHT) will be widely felt.
Before rushing to judgement though, it’s important to take the time to properly digest the announcements, take the appropriate advice and consider your alternatives.
The Government will publish a consultation in January 2025 on the proposed changes to Agricultural Property Relief (BPR) and Business Property Relief (BPR). Even if no further changes are made, what is proposed will not become effective until April 2026. There is, however, proposed anti-forestalling measures, meaning gifts made now, where the donor dies within seven years and after April 2026, will be subject to the new rules.
Until now, a combination of APR and BPR, combined with Lifetime Allowances and Residential Nil Rate Bands, meant many family farms had little or no IHT to pay. This budget has changed that, and if unwanted and unnecessary (and for some, significant) liabilities are to be avoided, early succession planning will be essential. More thought will need to be given – and sooner – to understand your position and potential exposure.
The following considerations should be explored:
• Life insurance can provide a lump sum payment to beneficiaries upon death, which can be used to cover various expenses and financial obligations including debt repayment. It can provide liquidity to the deceased person’s estate and offer a replacement source of income.
• You should consider if your business structure post-budget is now suitable. Do you need to change that structure or the ownership of the corporate entity?
• Is it possible or appropriate to pass the business down to the next generation earlier? This is likely to be a significant consideration for many.
• It is important to avoid knee-jerk reactions and making hasty decisions. Instead, take a measured approach, keep up-to-date with announcements and understand how they impact your financial situation, seeking the appropriate professional advice.
• Regularly review your financial and succession plans to ensure they remain aligned with your goals and the current economic environment.
• Focus on long-term financial objectives rather than short-term fluctuations. Avoid making drastic changes based on temporary market conditions or policy changes.
While there is no doubt the budget has significant and far-reaching consequences, all is not lost and careful planning at an early stage may be able to alleviate the worst of it.
For further information and support, please get in touch. Call 0808 144 5575 or email [email protected].
