Last week the Institute’s NI Tax Committee, chaired by Janette Burns, wrote to the Exchequer Secretary to the Treasury (XST) to express its concerns about the UK Government’s April 2026 proposals to restrict the availability of 100 percent agricultural property relief (APR) and business property relief (BPR) for inheritance tax (IHT) to a £1 million allowance.
A copy of the letter has also been sent to the Chancellor of the Exchequer, the House of Lords Economic Affairs Select Committee, the House of Commons Treasury Committee, and the First and Deputy First Ministers of Northern Ireland. The Committee has also responded to the related consultation ‘Reforms to Inheritance Tax agricultural property relief and business property relief: application in relation to trusts.’
The letter to the XST highlights the particularly damaging impact of these proposals which are already being felt across the UK but which will impact disproportionately for family owned businesses and farms in Northern Ireland.
Also highlighted is the need to ensure these proposals do not impact retrospectively which would damage the principle of legitimate expectation. Although the £1 million allowance will refresh every seven years on a rolling basis which will be of benefit to lifetime gifts, the proposals are especially unfair to the many owners of APR and BPR property who are elderly and/or in poor health amongst whom a common strategy is to hold these assets until death before passing these on to the next generation. Unfortunately, this cohort of taxpayers will not realistically be able to make future lifetime gifts to their children every seven years over an extended period of time to take advantage of the renewal of the £1 million allowance.
Whilst recognising that difficult decisions may be necessary in the current geopolitical and economic environment, the Government still needs to do whatever it can to protect genuine business and farming activity in the UK. The value of comprehensive, wide-ranging consultation also cannot be underestimated. The consequences of not consulting are already clear with reports of farmers and business owners in deep distress.
A broader review of the UK’s IHT regime, building on prior work conducted by the Office of Tax Simplification, is warranted to address concerns that the effective IHT rate falls as estates get larger. This should also examine mechanisms to target the concern that ‘non-farmers’ are currently investing in land to avoid IHT by using APR to pass assets to the next generation IHT free.
At the moment, the government is focusing solely on these two reliefs leaving those who run businesses and farms facing an unexpected tax burden with little choice but to consider selling. These reliefs are not loopholes but exist to allow farms/businesses to continue trading, without penalty, when the owner dies and the next generation takes over.
The Committee is urging the government to postpone the changes in order to consult wider and reframe this policy change in a way that it is more effectively targeted. However, if this is not an option, a range of potential mitigations are suggested in both the letter and the consultation reply which would curtail the impact.
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