Business Relief and Trusts

Following the Autumn Budget on 30 October which confirmed changes to both business relief and the inheritance tax (IHT) treatment of pensions, effective from April 2026 and 2027 respectively, there has been numerous articles written to outline what strategies could be employed for effective estate planning in the future. 

However, both of these measures are subject to technical consultation and we would caution against making any significant changes to financial plans until we have more clarity. 

In the short term we thought it would be helpful to bring into focus the current published update relating to business relief qualifying assets and Trusts as we have seen a number of articles on this particular planning strategy. 

£1 million allowance for trusts

The trustees of certain trusts are liable to an inheritance tax charge of up to 6% of the value of property held in a trust every 10 years. There is also an exit charge when property leaves the trust. Agricultural property relief and business property relief can apply to property in trust. 

There will be a combined £1 million allowance for trustees on the value of qualifying property to which 100% relief applies, on each ten-year anniversary charge and exit charge, consistent with the treatment of qualifying property chargeable to inheritance tax on death. 

Settlors may have already set up more than one trust comprising qualifying business property and/or agricultural property before 30 October 2024, in which case from 6 April 2026, each trust would have a £1 million allowance for 100% relief. 

However, an anti-forestalling measure means that for relevant property trusts created on or after 30 October 2024, the allowance is divided between these trusts where a settlor sets up multiple trusts. 

Given the reaction to the changes which were announced in the Autumn Budget we will await with interest the outcome of the consultation and any revisions to the proposal contained in the Budget.

If you or a client would like to discuss IHT planning, why not get in touch and speak to one of our advisers.

The information in this article is correct as of 12/12/2024.

The Financial Conduct Authority does not regulate estate planning, tax advice, wills or trusts.

This article is intended for general information only, it does not constitute individual advice and should not be used to inform financial decisions.