Death and Taxes S6:E1 – The new estate planning landscape post APR and BPR reform

Our focus today is on the practical planning options, what remains available, what may need to change, and how clients and their advisors should be approaching planning in this evolving landscape. I’m delighted to be joined by Tim Williams and Emma Heelis-Adams both partners in the private client team here at Burges Salmon, who have advised their clients throughout these difficult times.

So Emma and Tim, welcome back to Death and Taxes. Delighted to see you both. Full disclosure to our loyal listeners, we are recording this in June 2026, at the tail end of what appears to be the Keir Starmer Premiership. So who knows what is to come in the form of Andy Burnham or otherwise. But nonetheless, it is an important time to reconsider what’s been happening in tax policy over the last few years, particularly since October 2024. And we are currently in the middle of a three-year cycle that is particularly important to private clients and their advisors off the back of the non-dom reforms in 2025, the changes to agricultural property relief and business property relief in April 2026, and looking ahead indeed to inheritance tax on pensions in April 2027.

So, it is important for us all to focus on what are the practical planning options available to our clients in this new tax landscape. But before we get into that, Tim, would you just want to explain just how significant the APR, BPR changes were earlier this year, and what the implications were for business owners and landowners, and then we can come on to talk about how they can think best about their estate planning in this new regime.

Tim Williams (02:24)

Thanks, Guy, very happy to. So, yes, as of 6th April this year, both agricultural property relief, APR, and business property relief, BPR, have been heavily restricted. So, in the in the old world, before April this year, you could claim 100% relief on your agricultural and business property, no matter what the value. So, a very, very valuable relief for business owners and landowners, as you say. And that was relevant either on death against the inheritance tax charge that arises on the death of the relevant owner, or on moving those assets into trust.

So, what the changes mean are now that for both APR and BPR, the total 100% relief allowance is limited to two and a half million per person.  That’s a combination of both APR and BPR property. So, if you’ve got a mixed business, say a landed estate or a farm with different things happening, you need to look at the reliefs combined rather than two and a half million for APR and two and a half million for BPR: it’s not that generous. Over the twelve-month period from October 2024 through to November 2025, there were lots of changes around how the reforms were finally going to be introduced.  As of, I think December 2025, we got confirmation that the allowance would be fixed to two and a half million pounds. It would be transferable between spouses automatically. So, as between a husband and wife or civil partners, you can claim a total of five million pounds of relief on the death of the second to die, which is a welcome concession.  We also had clarification about how these reliefs would work with trusts.

So, as well as the individuals’ two and a half million-pound allowance, trusts also have a two and a half million-pound allowance. and we’ll maybe come back to how that works a little bit later on.

Guy Broadfield (04:24)

So, I think it’s probably important to point out that whilst the new rules are much less generous than the previous rules, actually this version of the new rules is better than we first expected when we thought the allowance might be a million pounds and it might not be transferable. So that is some comfort to our clients.

But to go from a regime where you previously had unlimited relief to one where you’ve got five million pounds of relief between a married couple is a significant change. And Emma, this also comes off the back of significant changes to more international focused clients a few years ago. Do you want to just comment briefly on that and how that fits in with this new landscape?

Emma Heelis-Adams (05:14)

Yes, absolutely. Thanks, Guy. I guess worth saying on the APR and BPR changes that above the two and half million allowance, you still get 50% relief, which is obviously still hugely valuable. But as you say, Guy, there’s also been really significant changes for international clients. So, we had what was referred to as the non-dom regime for those that were moving to the UK from abroad. That was quite a generous regime that allowed people to have significantly reduced tax exposure for up to 15 years when they moved to the UK.

We’ve now got a much less generous regime where you can have a relief for the first four years when you move to the UK for income tax and capital gains tax and for 10 years for inheritance tax.  Particularly on that inheritance tax relief, where you have maybe international individuals who’ve moved to the UK who thought that they would have a fairly generous inheritance tax position under the non-dom regime and maybe they also had business assets, they’ve sort of been hit with this double whammy of the non-dom regime being changed and business property relief being changed within 12 months of each other.

Guy Broadfield (06:28)

And then you’ve got IHT on pensions being the third and final part of this particular play, which is a significant change and is going to affect an even greater share of the population compared to the other rules.

So, one might think it’s all doom and gloom for clients and advisors alike, but I hope that that’s not the case. And indeed, I think the purpose of this podcast is to remind everyone that there are still planning options available. Some more generous than others, but nonetheless it’s important to be half glass full about these things rather than the other way around. So, Tim, I mean Emma’s touched on it there, but should we talk about the positive aspects of APR, BPR still remaining and how that might fit with estate planning options going forward.

Tim Williams (07:28)

Yes, absolutely. And I think you’ll hear lots of people saying, you know, this is life after APR and BPR. So, it’s important to remember that it hasn’t actually gone. It’s just been restricted and as Emma rightly points out, you still get 50% relief on value above two and a half million, which is still incredibly generous. So, some of the things that I think people worried happening, say crashes in land prices and share values falling, maybe hasn’t happened in quite the same way because there’s still value in those reliefs and you know, lots of people, let’s not forget, don’t do these things for tax planning reasons. They do it because they need to for their businesses.

So, what can still be done? So, the things that didn’t change in the Budget were around gifting in lifetime. So capital gains tax reliefs, holdover relief being the main one, still apply. So, where you have business assets or agricultural assets, you can pass those down in your lifetime to individuals, free of CGT, provided you meet the various criteria to get the relief.

And another thing that didn’t change was the seven-year rule. So, the rule that for inheritance tax, if you survive for seven years from making a gift, that gift falls off your inheritance tax clock. And still within that seven-year period you still have taper relief.

So, a lot of the planning options that looked at using different sorts of structures, so companies, partnerships, combined with outright gifts of value down a generation or to other members of the family, are still very much in play.

Guy Broadfield (09:04)

And it’s fair to say there was speculation that the seven year PET rule would be changed to possibly a ten year period and/or it might also be accompanied by a lifetime cap on gifts, but that hasn’t happened. And that still remains, as you say, a very generous form of passing assets down from one generation to another, if you can be comfortable with the outright nature of those gifts.

Tim Williams (09:34)

Exactly. And I think that’s the challenge and that was something that was very evident in the run into the Budget when lots of our clients looked at their options. If your next generation or the people who are going to own the business in the future are of a suitable age to take on outright ownership, that’s fantastic. You’ve got an easy – well an easier – decision to make. But the challenge comes where you still maybe do need to use trusts. As we’ve said, the allowances are still there, two and a half million pounds of 100% relief and 50% relief above that.

Guy Broadfield (10:10)

And two and a half million refreshing every seven years.

Tim Williams (10:12)

Yes, exactly. So yes, there are still scope for trusts within estate planning. So it may be that you can give away a smaller part of a business, so particularly where you’ve got corporates, say, you can give away a shareholding up to the value of two and a half million and still switch it into a trust to hold for the next generation. Or in some cases, clients might be prepared to pay some tax on the basis of the 50% relief in order to settle assets at the right time.

And it’s important to bear in mind that it’s now clear that assets that qualify for APR or BPR will also qualify for the instalment option. So, you can pay your inheritance tax bill over 10 years, and those instalments will be free of interest. So, if you were to create a trust now say and if you put above the two and a half million pounds of value in and so have a tax charge on the excess, you can pay that tax over ten years interest free, which is again quite a generous concession. And the same applies on death.

Guy Broadfield (11:17)

And some families have managed to diversify ownership across a number of different structures and individuals to share out each person’s two and a half million pound allowance or the respective trust allowances. So, there are there are options there.

Tim Williams (11:32)

Yes, exactly. And you know,  existing trusts, particularly those that were holding APR and BPR property before the October 2024 Budget, can be very valuable because it’s worth bearing in mind that whilst those trusts will in due course have a restricted allowance down to the two and a half million we’ve already mentioned, up until their next ten year anniversary charge (so trusts are taxed on a ten year cycle, looking back to when they were first created), the two and a half million pound cap will not apply to those trusts until their next ten year anniversary. So trusts that were settled relatively recently before October 2024 can still have 100% relief on the full value of their assets up until their next ten-year charge. So good use for existing trusts there as well.

Guy Broadfield (12:23)

Thanks, Tim. And Emma, before we get on to some more perhaps complex forms of planning, it’s worth touching on the generous exemption that is often referred to as gifts out of surplus income. Perhaps you can just explain how important that still remains?

Emma Heelis-Adams (12:41)

Yes, absolutely. That’s an exemption that’s been around for a very long time but maybe hasn’t had the focus on it in the past that it has now. This effectively allows individuals who have surplus income on a year-by-year basis to make gifts of that income without that gift being within the scope of inheritance tax at all. Now there are various parameters. As I say, it has to be out of income and the Revenue will look at, you know, do you have a remaining income for yourself to meet your day-to-day expenditure? If you’re having to dip into your capital reserves after making the gift, then that won’t fall within the rules. But what it does mean for those who’ve got very significant income that they don’t need, so maybe it’s dividend income, maybe it’s employment income, you can give away an unlimited amount of that income so long as you keep enough for yourself to meet your living costs on an annual basis. You do need to show a pattern of gifting as well so that you have to do this over a number of years. But if you can fall within the parameters, it is a very generous relief.

Guy Broadfield (13:56)

And that applies both for outright gifts and gifts into trust as well.

Emma Heelis-Adams (13:59)

Absolutely, yes.

Guy Broadfield (14:01)

Which is, if you take a step back, is a very generous exemption for high earning individuals. And dare I say it, is one that we’re always slightly wary that might be the subject of reform, albeit hasn’t yet. So, whilst the current rules are in play, it’s one to make use of if you are in the fortunate position to be able to do so.

Tim Williams (14:25)

And it’s worth saying, isn’t it, Guy, that as the pension reforms that we referred to earlier on, coming in April 2027, loom, I think lots of clients are looking to turn on or increase their pension income with a view to giving it away. And that is allowed. It’s clear from the Revenue’s recent technical notes that they accept that you can do that. But, as you say, Emma, it’s not quite as straightforward as just saying I’ve got lots of income, I’m going to give some of it away. There are certain niceties to be observed to fall within the rules.

Guy Broadfield (14:56)

Absolutely. And of course, we won’t talk about it a lot, but there’s still the idea of nil-rate bands, of course, which are helpful and available for slightly smaller levels of trust planning in lifetime, and that remains the case. So, I mean overall, I think our view would be – it’s fair to say our view is that planning hasn’t disappeared – but the landscape has shifted. So, if you do have clients who have used up their APR, BPR allowance, for example, and the nil-rate bands and using surplus income, that’s all well and good. But some clients may not be in position to do that, or they may not have relievable assets. And it looks as though some of those tax outcomes are going to be increasingly aligned across taxpayers and the options available to taxpayers are going to be important when it comes to thinking about other solutions. And one we’ve talked about just before coming on the pod is the idea of insurance. So, for those taxpayers who are in a position where they don’t want to change the status quo of ownership, for example, Emma, do you want to talk about the role that insurance can play for those clients?

Emma Heelis-Adams (16:23)

Yes, absolutely. I mean, again, insurance is, it’s been around forever really, but again, the focus hasn’t been on it so much, but I think it’s really something that clients are increasingly looking at and whether that is insurance to cover potential inheritance tax liability on death or perhaps it’s to cover the seven years risk after you’ve made a gift. There are different options available with insurance.

For those looking to insure on death, you have term life insurance, which will cover a period of time. There is whole of life insurance, which can cover you indefinitely, but that tends to come with much higher premiums. So, for clients, it’s often a case of looking at the calculations, looking at the different premiums that they’ll pay with different types of insurance and working out what’s best for them.

And often taking a mathematical approach to it in terms of what might the liability be? And how much my premium is going to be over a period of time?

Guy Broadfield (17:32)

And yes, is one consideration, you know, term insurance for a ten-year period might see you through and who knows what might happen in ten years, whether that’s as a matter of tax policy or family planning or otherwise.

Tim Williams (17:44)

And it’s something that lots of people look at alongside all of the other planning options, isn’t it as you said, term insurance to cover a gift or doing some of the planning we’ve talked about, but insuring some of the risk as well. Either to bring down premiums or accelerate the gifting process can be, is a really important consideration.

Guy Broadfield (18:02)

And for those clients who do want to make gifts or in the position where they can afford to give away assets, a key consideration is what form that takes. And Tim to your earlier point, trusts have often been a key part of that in terms of being able to separate out control of assets from economic benefits.

But there are other options that are going to be considered in this new regime by clients across the wealth spectrum. Some, Emma, some financial advisors are talking about discounted gift trusts, for example. Do you want to comment briefly on that before we perhaps come on to more of some of the more corporate structures that can achieve the same outcome?

Emma Heelis-Adams (18:52)

Yes, absolutely. So, there’s a range of different, I guess, types of trust that have been used over the years and that are still out there. So a discounted gift trust generally works by putting an investment bond, some sort of wrapper effectively for tax purposes, within a trust, but the person putting it into trust retains the right to receive a regular income from that trust, which is paid out of the investment bond.

And because of that retention of the right to income, the capital amount being put in is given a discount. So, it’s not the same value. Your bond might be worth, let’s say, a million pounds, but because of the right to receive the income, it’s discounted down. So you can end up putting more value in than appears to be the case on the face of it because of the discount. It’s very important that you get the valuation of that right.  And HMRC do look very carefully at discounts, but it can be a way to give away some value, but retaining, effectively, an income stream if you think that’s what you need. There are other types of trust, loan trusts, for example, where you loan assets into the trust. Now the benefit of the loan will still be within your estate for inheritance tax purposes, but the growth will stay in the trust. So, if you have assets that you think might grow significantly in value you can protect the growth. The growth would be outside of your estate, even if the loan remains in your estate.

So, there’s various different, I guess, different types of trust planning ideas that we come across. Always very fact specific for clients. Clients need to make sure that they understand exactly what type of investment they’re investing into, what type of trust, what are the terms of the trust, is it the right thing for them?

So, with any of those types of structure, making sure that you’ve got good advice and making sure that it fits your circumstance.

Guy Broadfield (20:51)

Yes, absolutely. Always a good reminder to, you know, can you afford to give it away? If you can afford to give it away, great. But what actually are you giving away? And what are you retaining? And all of the tax consequences and otherwise that flow from that.

I mean, historically, when it comes to, certainly for business owners and entrepreneurs before a sale or an exit event, we’ve done a lot of trust planning, taking advantage of the unlimited allowance for business relief. It’s a fact that type of planning has become less efficient in these new rules given the limit of the allowance to two and a half million pounds. So I think we’ve all talked previously about company structuring with cash after an exit. And I think the idea of family investment companies is something that will continue to be a useful tool to discuss with clients if it fits them and fits their circumstances. That’s both for clients in the UK, but also those clients with more international connections.

And Emma, do you want to talk briefly about – and we can talk about UK family investment companies and non-UK family investment companies – but it’s interesting to see the international element to that planning which is coming through now as well.

Emma Heelis-Adams (22:18)

Yes, absolutely. I guess traditionally, family investment companies, FICs, I guess, in the UK market, were often thought of as using UK companies. And with the idea that you try to mimic a trust in some ways by splitting your economic value from the control of the assets by having different classes of shares. But there’s no reason why that needs to be a UK company and something we increasingly see for families that I guess you might term them as internationally mobile, but these days it’s not that unusual to see a child decide that they’re going to leave the UK for a period of time or maybe the parents are wanting to leave. If you think that you might have a family member who isn’t going to stay in the UK indefinitely in the future, then you might want to consider having a non-UK company. What that does is for inheritance tax purposes, you have then shares in a non-UK company, which is a non-UK situated asset.

If you leave the UK, after a period of up to 10 years, you move outside of the UK inheritance tax net. You are then only chargeable to inheritance tax on your UK asset. If you own shares in a non-UK company, then those shares are no longer within the scope of UK inheritance tax.

So, by using a non-UK company as a FIC, you are potentially taking assets outside of the UK inheritance tax net if you have family members that are living abroad or are going to live abroad in the future, so long as they stay outside the UK for the right period of time, which as I say is usually 10 years before you start to get that benefit.

Now, the thing to watch out for there is if you still have UK residents involved in the company, there are various tax anti-avoidance rules, which mean that you can have income and gains arising in the company imputed to the shareholders. Now, the idea for most family investment companies is that you want to roll up the income and gains within the structure. It acts as a tax deferral mechanism. If instead your shareholders are being taxed on the income and gains as they arise, it’s not really serving the purpose that you maybe wanted it to. We then end up looking for some clients at hybrid structures where you have, it’s a non-UK company, but it’s managed and controlled in the UK. And if you have the company managed and controlled in the UK, then some of those anti-avoidance rules don’t work. So, you can still obtain the deferral for income tax and capital gains tax, but have that potential inheritance tax benefit of a non-UK company.

Guy Broadfield (24:59)

Yes, and so I think it’s a good example of you know, for those clients with a financial background or possibly a corporate background who understand company structures, there are additional considerations to estate planning now based around family investment companies for them to consider. And that might be before an exit or indeed after an exit. But to your point, Emma, always important to know why you’re going into it. You’re not just having a family investment company for the sake of having a family investment company.

There’s a spectrum of reasons why you might go into it, whether that’s inheritance tax planning or the rolling up of income and gains within the corporate structure. But if we now throw in this idea of the non-UK aspects, then for some families that will be attractive but important to pay attention to the detail of the rules that you mentioned there to make sure that you can achieve the aims that you want.

Emma Heelis-Adams (25:52)

And I think worth saying as well, also worth thinking about the end game for your FIC. How do you think you’re going to extract value at the end? Because we see sometimes clients are very interested in how it’s going to be set up and how it will be funded. But I think always worth bearing in mind what is its purpose in the future.

Guy Broadfield (26:12)

And Tim, that I mean that applies for a trust as well, presumably. There has to be an understanding amongst the family about how it will work for them over the medium to long term.

Tim Williams (26:19)

Exactly. And I think with all of these things it is having that overview of, why are you doing it and ideally a sort of an idea of how long it will last for. And that’ll be different for different families, be different for different assets.

Some trusts, particularly those holding business assets, may not be designed to run for a very long time. But if they are more of an investment holding trust, they may be multi-generational. And the point that you made about putting value out of somebody’s estate and into a different vehicle, be that through a FIC into the hands of the next generation or through a trust, that growth in value can be settled at a particular level within the, you know, either within the BPR rules or possibly even within nil-rate bands. But the point being if you’ve got assets that are likely to grow significantly over the coming years, they can grow inside the trust vehicle, outside of the estate of whoever put them in there, as long as they survive for seven years.

So it’s still really, really useful value for those sort of highly appreciating assets of different sorts.

Guy Broadfield (27:26)

Thanks, Tim. Agreed with all that, of course. But I think now we come to the conclusion for this pod and like all good podcasts, we need to list out some practical takeaways for our listeners. So Tim and Emma, I’m going to ask for three practical takeaways from you in total. So divide it between you as you wish. It’s not three each, don’t worry. But Emma, what would you say

off the bat? Would you say reviewing existing structures?

Emma Heelis-Adams (28:00)

I would say, I think I would probably start by saying look at what your current inheritance tax exposure is and that will be a mix of looking at any existing structures, looking at assets in your own name and working out, you know, is that an exposure that you’re comfortable with or are you going to think about doing something more to try and reduce it? So I think that should be your starting point.

Guy Broadfield (28:22)

And Tim, how would you how would you take it on?

Tim Williams (28:24)

I would say, from there, look at your APR and BPR position. And a point that I meant to make at the beginning is that, this is not, lots of people just talk about this as the farmer tax. It is all business owners. So if you qualify for BPR, you’re still restricted as well. So review your inheritance tax position, look at the reliefs very carefully, and look at the generation beyond and what you can do in terms of passing assets on in your lifetime or think about trusts where appropriate.

Guy Broadfield (28:56)

And a combined third and final point from both of you? How about I’ll offer this. I’d say joined up advice across lawyers, accountants, financial planners, and advisors on the investment side as well, because it all goes to the question of family wealth and you can’t work alone as an advisor, you’ve got to join it up.

Tim Williams (29:17)

Absolutely.

Emma Heelis-Adams (29:18)

Completely agree.

Guy Broadfield (29:19)

Thanks again for listening to this episode of Death and Taxes and Everything in Between, the Private Wealth podcast from Burges Salmon. You can listen to our previous episodes and find out more about the issues we’ve discussed today at Burges-Salmon.com or by connecting with us on LinkedIn. We’ll continue to bring you our insights on the evolving UK tax environment, focusing on the practical implications for individuals, families, business owners, and trustees. So do keep an eye out for future episodes and don’t forget to subscribe. Thanks again for listening.