Consultation on Agricultural and Business Property Relief: Changes to Related Property Rules and Valuation Issues

The government's consultation on the proposed changes to agricultural property relief and business property relief (APR and BPR) from inheritance tax (IHT) concluded on 23 April 2025. 

Our series of articles has already examined the potential impacts for landowners and business owners. 

In this article, we take a closer look at the related property rules and potential valuation issues.

Why does it matter?

Consider a company valued at £1,100,000, owned by two different trusts, each holding 50%. Under the current rules, each trust's holding might be valued at only £495,000 after applying a minority discount (that is less than 50% of £1.1m).

That discount reflects the fact that it is difficult to sell a non-controlling shareholding in a private company and so the seller would probably require a discount. Imagine trying to sell a half share in your home: no one would pay 50% of the value of the whole house. The same idea applies.

The total value of the two trusts, after the discount, is now less than £1m, even though the company is worth £1.1m. 

If the same company had been owned entirely by a single trust (or person) it would have been valued at £1.1m. Under the new rules from 6 April 2026 there would be inheritance tax on the £100,000 over the £1m value allowance.

However, under the proposed changes, if both trusts were set up by the same settlor, the holdings would be combined and valued as a single 100% holding, resulting in a valuation of £550,000 for each trust and removing the tax saving.

What are the current rules?

Minority Discounts for trusts:

Currently, company shares held by different trusts are valued separately, with minority discounts applied based on each trust's holding. In the example above, the company is valued at £1,100,000 and is owned by two different trusts, each holding 50%. The minority discount might reduce the value of each holding to £495,000 for IHT purposes.

Related Property Provisions for spouses and civil partners:

IHT legislation already includes rules regarding related property. The current rules aim to prevent some types of taxpayers artificially dividing ownership to reduce the overall value of assets or interests for IHT purposes.

These rules apply to spouses and civil partners. If a husband and wife own shares in a company, the shares are valued as a whole and then the value allocated to each spouse proportionally. This prevents any discount applying to each individual's interest. So for example a successful entrepreneur cannot artificially create an inheritance tax saving by gifting shares in her company to her husband (but there might still be income tax reasons for doing that).

What is changing?

From April 2026, individuals will have a £1 million allowance for qualifying agricultural and business property. 

There may be attempts to transfer assets across multiple trusts to create discounts and maximise this £1 million allowance. 

To address this, the government has sought views on introducing rules similar to the existing related property provisions for IHT. Property that qualifies for 100% APR or BPR settled by the same settlor across multiple trusts could be valued collectively.

This would mean that multiple transfers by the same settlor across multiple trusts could be connected for valuation purposes. If a settlor uses their personal £1 million allowance to settle shares of qualifying property across multiple trusts, no minority discounts on the valuation would be possible, and the asset would be valued as if the ownership was not split.

It remains uncertain whether this will only apply to trusts settled by the same settlor or if it could extend to connected family trusts. We could even see transfers of APR/BPR qualifying property by spouses and civil partners connected for valuation purposes. 

This higher valuation would lead to increased IHT charges, affecting the overall tax liability for trusts.

What next?

The government will now consider responses to the consultation before drafting the legislation to bring in the changes. We will have to wait and see whether the related property rules come in as expected and whether they could also apply to connected family trusts, linking together property settled by spouses and civil partners. 

In the meantime, Burges Salmon is keeping a close eye on developments. We have extensive experience with tax advice, estate planning, family advice, corporate advice and property advice. Our private wealth team can advise you on these issues and guide you through what the options might be ahead of the changes next April. 

More information

We are currently mid-way through a series of articles considering what the changes might mean for landowners and business owners:

1. Introduction and deep-dive on the detail - Consultation on agricultural and business property relief 
2. Landowners and family businesses - impact of proposed IHT changes on lifetime gifts
3. Landowners and family businesses - impact of proposed IHT changes to estates on death  
4. Landowners and family businesses – impact of proposed IHT changes to trustees

Do read through the above articles as well as look out for upcoming posts that will cover:

1. Paying IHT by instalments 
2. Impact on entrepreneurs