Understanding Business Property Relief (BPR)
BPR provides relief from Inheritance Tax (IHT) on qualifying business assets, such as shares in unlisted companies, interests in businesses, and land or buildings used in business operations. This relief can be either 100% or 50%, depending on the type of asset and its usage.
Benefits of a BPR Trust
Tax Efficiency: By placing qualifying business assets into a BPR trust, you can minimize IHT liabilities. This ensures that your business assets pass to your beneficiaries with reduced tax implications.
Asset Protection: A BPR trust can protect business assets from potential creditors of the surviving spouse, ensuring that the assets remain intact for future generations.
Flexibility: Trustees have the discretion to distribute assets among beneficiaries according to the trust’s terms, providing flexibility in estate planning.
Preservation of Business Value: Shielding assets from potential Capital Gains Tax (CGT) helps preserve the value of your business for your beneficiaries.
Upcoming Changes to BPR Regulations
The Labour Government’s Budget on 30 October 2024 announced significant reforms to BPR, effective from 6 April 2026. These changes include:
- Introduction of a £1M Allowance: Each individual will have a non-transferable £1M allowance for 100% BPR, refreshing every seven years.
- Restriction on Multiple Trusts: Multiple trusts established by the same settlor will need to share the £1M allowance.
- Transitional Period: Transfers made to trust before 6 April 2026 will benefit from unlimited 100% BPR, but this opportunity will no longer be available after the deadline.
Why Act Before 1 April 2026?
Maximise Tax Relief: Establishing a BPR trust before the deadline allows you to take advantage of the current unlimited 100% BPR, ensuring maximum tax relief on your business assets.
Avoid Future Restrictions: After 1 April 2026, the new £1M allowance and restrictions on multiple trusts will limit the tax benefits available. Acting now ensures you avoid these future limitations.
Secure Estate Planning: By setting up a BPR trust before the changes, you can secure your estate planning strategy, protecting your business assets and ensuring they pass to your beneficiaries with minimal tax implications.
Establishing a BPR trust before 1 April 2026 is a strategic move for business owners looking to maximise tax relief and protect their assets. With significant changes to BPR regulations on the horizon, acting now ensures you benefit from the current rules and avoid future restrictions.
Contact us with any questions you have about the upcoming changes, to explore how a BPR trust can fit into your overall strategy or if you would like more detailed information on setting up a BPR trust.
Wednesday 2nd July 2025