What actions should you be taking following the IHT changes announced?

As a business owner, staying informed and up to date with any tax changes is important to ensure you are remaining compliant and are also tax efficient.

The Government's recent announcement of proposed changes to Inheritance Tax (IHT) has brought estate and succession planning sharply into focus for individuals, families, and business owners.

Although these changes are not yet in force and are expected to be phased in over the coming years, now is the time to review your current position and take proactive steps. In this article, we outline the key actions you should consider taking so that you are well-positioned ahead of the changes.

Following the Government's recent announcement of several significant changes to IHT, which are to be phased in gradually over the coming years, it's important not to wait for the new rules to take effect before taking action. Although these changes are not expected to come into force this year, many of the strategies available can take several years to become fully effective for IHT purposes. This means that acting now could help you make the most of current reliefs and exemptions while also positioning your estate advantageously for the changes ahead. Proactive planning ensures you retain control and reduce the risk of unnecessary tax exposure for your beneficiaries.

Assess IHT exposure personally and as a business:Firstly, it is essential to begin by understanding your current IHT exposure on a personal level. Previously, IHT was largely a personal issue concerning individual estates. However, it is now a business issue as well. Business assets that were previously protected under Business Relief (BR) may now be exposed to IHT. This shift could have significant implications.

If business assets are no longer fully protected, the resulting tax liability could require drawing on company cash or profits to meet the obligation, potentially impacting business performance and other shareholders. For business owners, this makes it more important than ever to assess exposure early and develop a strategy to mitigate the potential impact.

Succession planning and estate planning:It is more important now than ever to review both your succession planning and overall estate planning. Succession planning ensures that there is a clear and tax-efficient strategy for passing on your business, assets, or both to the next generation. This not only helps protect family wealth but also protects the continuity and stability of the business.

Estate planning involves looking at all personal and business assets, evaluating available reliefs (such as Business Relief and Agricultural Property Relief), and structuring ownership in a way that minimises tax liability. Given that some planning strategies take several years to be effective, early preparation is crucial.

Wills:Having an updated will is a key part of any estate plan, we recommend reviewing and if necessary, updating your will every five years, or sooner if there has been a significant change in your personal circumstances, assets, or in tax legislation. By keeping your will current and aligned with your wider tax planning strategies, you help protect your estate, reduce complexity for your beneficiaries, and ensure your intentions are clearly and legally recognised.

Although the new IHT legislation has not yet been enacted in law, there are a number of ‘anti-forestalling’ provisions, and it is important to begin planning now in order to minimise future exposure. HMRC have held a consultation on the proposed changes, which we at Oldfield have actively participated in, submitting our views and recommendations on the proposed changes, and requesting additional clarity from HMRC on a number of areas.

We are assisting our clients with Succession and Inheritance Tax planning, particularly in view of helping them to prepare for business exit, retirement, or introducing and handing over to the next generation of shareholders. This is becoming increasingly important as the changes to Inheritance tax are looming on the near horizon.

If you feel you would benefit from a conversation regarding anything discussed in the above article, please do not hesitate to get in touch by using the form below, and a member of our team will be in touch to arrange a call. We are here to support you in navigating these complexities.

Please note: This article is provided for information only and was correct as at the time of writing (01/05/25). Any lists and details provided above are not exhaustive and are not intended to be full and complete guidance.  No action should be taken without consulting detailed legislation or seeking independent professional advice. Therefore, no responsibility for loss occasioned by any person acting or refraining from action as a result of the material contained in this article can be accepted.