ICAEW raises concerns over UK’s BPR and APR reforms

The ICAEW argues that estates with agricultural assets should be able to settle inheritance tax liabilities without being forced to liquidate essential operational assets. Credit: DifferR/ Shutterstock.com.

The Institute of Chartered Accountants in England and Wales (ICAEW) has expressed concerns regarding the updated reforms to business property relief (BPR) and agricultural property relief (APR), describing the changes as “very disappointing”.

Under the revised plans, an estate that qualifies for 100% BPR or APR will be entitled to a new £1m ($1.34m) allowance.

Any qualifying property value exceeding £1m will be subject to a 50% relief rate.

This adjustment means that a couple could potentially transfer up to £3m without incurring taxes.

The ICAEW has criticised the government for only making a minor concession to index the £1m allowance to inflation by the year 2030.

The Institute also noted that the government’s revisions failed to address significant practical issues that had been raised and suggested that the new 100% allowance of £1m should be made transferable between spouses.

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It argues that estates with significant business and agricultural assets should be able to settle inheritance tax liabilities without being forced to liquidate essential operational assets, which could lead to the collapse of viable businesses and farms, with wider implications for employment and national food security.

ICAEW Technical Manager Katherine Ford said:  “We raised legitimate concerns about the practical aspects of these proposals, such as the lack of transferability between spouses, and how estates will fund the unanticipated inheritance tax (IHT) liabilities that will arise after 5 April 2026, in our response earlier this year. 

“We are very disappointed that the government has failed to address these points and urge it to reconsider.”

The Institute has called for additional provisions that would allow for inheritance tax payments without subjecting estates to double taxation through income or capital gains taxes when extracting funds from a business.

The ICAEW has pointed out that many businesses and farms will exceed the £1m threshold and has urged for reassessment to ensure that the government’s projection that 75% of estates will not be adversely affected, is met.

Concerns include the impact of these reforms on business owners who have made long-term financial plans based on the expectation of full APR or BPR upon death.

The Institute has highlighted the potential for disproportionate impact on older individuals, those with limited life expectancy, or those who are unable to revise their wills or make lifetime gifts and has called for the introduction of transitional relief measures.