Making the most of business property reliefs

If you own a trading business, company or farm, some or all of its value will be exempted from inheritance tax when you die. This is due to business and agricultural property reliefs.

As a result, currently the most tax efficient method of business succession is to retain ownership and pass it on via your will, free from inheritance tax with also a capital gains tax uplift to its base cost, meaning your beneficiaries can sell it free of tax (which can sometimes act as a barrier to effective business succession).

This, plus pressure for reform of what is agreed to be an overly complex tax compared to the amount of revenue it raises, led to January’s All Party Parliamentary Group report.

Amongst other radical reforms, the report recommended the abolition of business and agricultural reliefs, as well as removal of the capital gains uplift on death.

It’s not clear whether these recommendations will be implemented, but it’s likely that some reform of inheritance tax is on the horizon.  

Now is a good time to consider your business succession

Accordingly, now is a good time to consider your business succession and maybe look to pass on some of the ownership to the next generation.  

If that’s a step too far, maybe consider a gift to a family trust, which will pass the value out of your estate but still allow you to maintain control. Alternatively, you could broaden share ownership in your family but maintain control via bespoke share rights.  

There is no one size fits all. You should take advice to understand your options and work out what is best for you and your family.

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