Website Cookie Policy

We use cookies to give you the best possible online experience. If you continue, we’ll assume you are happy for your web browser to receive all cookies from our website.
See our cookie policy for more information.

Practice Areas

More Information

Leeds: 0113 244 6100

Sheffield: 0114 267 5588


Send us an enquiry

The future of inheritance tax: what potential changes lie ahead?

13 February 2024

Potential changes to Business Property Relief and Agricultural Property Relief.

In anticipation of a general election at some point in 2024, inheritance tax (IHT) is a hot topic and there has been publicity recently which suggests that IHT could be abolished. This would be a very significant change, and it may be more likely that the next government decides instead to reform inheritance tax reliefs such as Business Property Relief and Agricultural Property Relief. 

What is Business Property Relief (BPR) and Agricultural Property Relief (APR)?

The main aim of BPR and APR, in policy terms, is to reduce the risk of IHT charges, which could result in the breakup of a viable business or farm - for example, when an owner of a family business passes control of the business on to his children or grandchildren, either during the owner's lifetime or by way of a gift in their Will. BPR and APR provide an exemption from IHT for relevant business or agricultural assets if the conditions are met. 

Broadly, where the conditions for the relief are met, BPR reduces the value of gifts of relevant business assets made during lifetime or on death, for the purposes of calculating any IHT due on those gifts. The reduction in value will be either at 100% or at 50%, depending on the type of asset and who owns it. BPR is therefore a very valuable relief and enhancing or preserving BPR is a key priority for many of clients.

APR is another relief from IHT. APR reduces the agricultural value of gifts of agricultural property, whether made during a person's lifetime or on death. Agricultural land that is farmed ‘in hand’ (i.e. by the owner) qualifies for APR after two years, and if the land is farmed by another person (i.e. it is tenanted farmland) then it qualifies for APR after 7 years. The rate of relief is either 100% of the agricultural value, or in some circumstances the rate is 50%.

In 2020-2021, 1,300 estates benefitted from APR, and in the same year, 3,380 estates benefitted from BPR. Together, these reliefs are estimated to cost £1.1 billion for transfers/gifts which happen on death, or 20% of the total revenue raised by IHT from deaths in 2020–2021. 

Institute for Fiscal Studies- ‘Reforming Inheritance Tax’ Report

Although APR and BPR provide a welcome relief to many businesses and landowners, in a recent report titled ‘Reforming Inheritance Tax’, the Institute for Fiscal Studies (IFS) considered several options for reforming BPR and APR (including the complete abolition of these reliefs).

The report is critical of the availability of APR for let farmland, as there is no requirement for the owner to have ever actually farmed the land themselves. As the relief is uncapped and there is no limit on the agricultural value which could (in theory) qualify for APR, the IFS considers that the relief is poorly targeted if the intention is to protect small farms.

BPR covers both private businesses and partnerships where the deceased exercised control over the business and held an interest in the business, as well as shares in unlisted trading businesses where the deceased was merely an arms-length investor e.g. AIM shares. The IFS argues that BPR could be more targeted and potentially the value of the relief could be limited to benefit small firms more.

The IFS suggested several options for reforming BPR and APR, including the abolition of both reliefs, or the possibility of limiting these reliefs to a maximum of £500,000 per estate. Whilst these changes would result in a small increase in the proportion of estates which pay any IHT at all, the changes would significantly increase IHT revenues (assuming no behavioural change) and would have a considerable impact on business owners and farmers.

Other potential changes

It seems unlikely that the next government will abolish both reliefs in full. Many family businesses and farmers rely on these reliefs in order to ensure that they can pass on their business/farm to the next generation. 

It is certainly possible that the scope of the reliefs could be restricted, for example the removal of BPR to AIM-listed shares. APR could also be removed for tenanted farmland, however this change would have an impact on the agricultural sector and might lead to more in-hand farming and reduced options for existing tenanted farmers.


Since the publication of the report, and with a general election looming in 2024, the Labour Party has since ruled out scrapping APR if they were to win the next general election. This has been a welcome relief for farming organisations who had warned that removing APR would above all endanger more vulnerable tenant farmers, who manage approximately a third of English farmland.

The Financial Times also reported in December 2023 that the Labour Party has no immediate plans to change BPR.

As there seems to be little appetite to completely abolish these reliefs, the next government might look to reform them and restricting their scope. In any event, it is important that business owners and landowners take appropriate advice when considering their estate planning options in order to ensure a smooth succession to the next generation and to maximise their chances of securing BPR and APR.

If you would like to discuss any aspect of this article further, please contact Molly Neville or any other member of the private client team on 0113 244 6100.

You can also keep up to date by following Wrigleys private client team on X.

The information in this article is necessarily of a general nature. The law stated is correct at the date (stated above) this article was first posted to our website. Specific advice should be sought for specific situations. If you have any queries or need any legal advice please feel free to contact Wrigleys Solicitors.




Molly Neville View Biography

Molly Neville


23 Apr 2024

Companies House fees increasing from 1 May 2024

In this article, we look at the reasoning behind the fee increases and what they mean for charitable companies and social enterprises.

17 Apr 2024

Independent schools’ development: policies for navigating the modern fundraising landscape

Independent schools face fundraising challenges in a tough climate. Learn best practices for compliant and effective fundraising policies.

09 Apr 2024

Charities Act 2022: new provisions introduced

What do the latest provisions mean for your charity?