Government launches consultation on IHT reliefs for trusts

The UK government has launched a technical consultation on the proposed changes to agricultural and business property reliefs for trusts. 

The consultation, which is open until 23 April 2025 focuses on how the new rules will affect property settled into trusts, with a particular emphasis on the £1m allowance for property qualifying for full agricultural property relief (APR) or business property relief (BPR).

An unexpected part of the consultation canvasses views on an “anti-fragmentation” rule, which seeks to prevent individuals from reducing their IHT liabilities by settling property into multiple trusts. This had not previously been suggested and could mean property owned by the person creating the trust could be valued as if they still owned the trust’s assets, even though there are no circumstances in which they can benefit from them.

Louise Speke, chief tax adviser to the Country Land and Business Association said: “Trusts are not there to avoid paying tax, they are useful to help families manage their finances. They have been part of the English legal system for centuries, and are used for a myriad of reasons – rarely to do with tax – to help families provide ongoing management of farmland and businesses.”

NFU president Tom Bradshaw said it was “incredibly disappointing” that the government had chosen to only focus on one part of the planned IHT changes.