Page 12 - Town & Around - March 2025

12 Town & Around March 2025 Tel: 01485 540620 email: editor@townandaround.net
WHY THE “FAMILY FARM TAX” ISN’T JUST ABOUT FARMING
By Kathryn Gigg Chartered Accountants, Hunstanton
eaders will not have failed to notice that themselves and also the other assets of the
one of the key announcements of the deceased) and the existing IHT bands are not
RAutumn 2024 Budget was that in expected to increase at all until 2030, if then.
future, full Agricultural Property Relief (APR) Given that average domestic house prices are
for Inheritance Tax (IHT) will be restricted to currently close to £300,000 and the IHT Nil
the first £1m of relevant property with the Rate Band has remained at only £325,000 we
excess being taxed at 20%. Full details have can reasonably foresee that by the end of this
not yet been published, and the Government decade most families will at least be within the
has been disingenuous about the number of scope of IHT (although married couples will
farms affected (at best). Most industry generally be able to use both Nil Rate Bands)
commentators think that it will impact on and anyone with a business or share in a Trusts to further take assets out of the Estate
virtually every commercial farming operation. business worth more than £1m will potentially
What many have overlooked is that the be facing an IHT bill, overturning a policy of at death, although this may mean a modest
changes to the IHT rules are not simply aimed encouraging private sector businesses which IHT charge within the Trust every ten years.
What is also clear is that sticking one’s head
at farms. Although the change in APR has been has been in place for over 30 years. in the sand is not a very constructive approach
widely publicised, there has been much less In a remarkable piece of double speak,
concentration on the similar Business Property ministers have already said that things are not here. Without a doubt, there is a problem on its
way: we are all getting older, and the new rules
Relief (BPR) which is available to almost all as bad as they look since there will be ways of
trading businesses and their shareholders. BPR avoiding the tax charge for some – take effect from April 2026. Reconstructions
and Will planning all take time, and the sooner
will now be restricted to the first £1m of notwithstanding that they are also stating that
qualifying assets. they are looking to restrict tax avoidance business owners, as well as the farmers, take
specialist advice from both their accountant
Whilst the number of farm businesses is generally (even though avoidance is entirely
relatively small (about 200,000 of which only legal). What we can say is that those in and their solicitor (who will normally need to
work together here), the better.
about 40,000 are of sufficient size to be fully business and particularly those who are
Memo: The Spring Budget is scheduled for
commercial “family farms”), the number of looking to pass the business to the next 26 March 2025.
private sector businesses is much greater, at generation need to be looking at their potential
If you require any tax advice, whether
something over 5.5m, with over 27m liabilities as soon as possible and in some cases personal or business, please contact us at
employees. Obviously not all of these will be considering the acceleration of the succession
worth over £1m, but in 2021-22 there were process. The seven year “potentially exempt Kathryn Gigg Chartered Accountants,
01485
on
534800
Hunstanton
or
over 4000 claims for BPR, of which 13.3% transfer” window is still there, although with kate@kathryngigg.co,uk.
were for amounts over £1m. Since then, we some anti-forestalling measures where the N.B. Article written January 2025
have had inflation of about 20% (which will donor of business assets dies within the seven
affect both the value of the businesses years. There is also potential for the use of © Kathryn Gigg Chartered Accountants 2025
A FEW TIPS FOR PRE-5 APRIL 2025 TAX PLANNING
By Kathryn Gigg Chartered Accountants, Hunstanton
Capital Gains (CGT) regularly. Individuals can each make capital gifts of £3,000 annually, and
CGT has changed significantly in recent years with the current rates for the allowance can be carried forward for one year, so if nothing was gifted
gains made by individuals generally, and on residential properties, in 2023/24 the exemption available up to 5 April this year will be £6,000
standing at 18% for gains made within the Basic Rate Income Tax band (or £12,000 for a married couple). In addition, £250 can be given to
or 24% for gains above the Basic Rate band. The same rates remain for anyone who has not received part of the larger amount. There are also
2025/26 tax year (2026/27 TBC). Gains on residential property must be allowances for regular “gifts out of income” but these must be evidenced
separately declared (and tax paid) within 60 days of completion and the in line with strict rules. Any gifts in excess of these amounts will remain
Annual Exemption is now only £3,000. If capital disposals are planned “on the clock” for seven years.
for the very near future it would make sense to calculate the gains now It seems unlikely that the threat of increased IHT liabilities will go away
and, if beneficial/possible, aim to sell before 5 April and hence make good over the next few years, so if nothing else, it is worth calculating the value
use of the balance of any Basic Rate Band left and the Annual Exemption, of your “estate” - the tax rules here are quite complex, but if the answer
despite it now being quite small. Gifts between spouses or those in civil (including investments, property and pensions) comes to over £325,000
partnerships are not subject CGT so with a bit of forward planning, (£650,000 for a married couple) it is worth seeking professional advice
moving assets between spouses can maximise CGT allowances for the sooner rather than later.
future.
The Annual Exemption cannot be carried forward or transferred, so it Pension Contributions
is lost if not used during the tax year. Pensions are a very tax efficient tool, which, subject to the recent changes
Note that Business Asset Disposal Relief will only continue to stand at to the IHT rules, and taking advice from an Independent Financial
the benign effective rate of tax of 10% until 5 April this year, then for Adviser, can be used as part of a wider wealth and tax planning strategy.
2025/26 will increase to 14% and thereafter to 18% for 2026/27. Even non taxpayers (aged under 75) can save up to £2,880 each year,
and the government will top it up by 20%, so if you pay £2,880 you will
Inheritance Tax (IHT) find £3,600 in your pension account. Higher rate taxpayers will also be
Inheritance Tax seems to have come back onto the government’s agenda able to claim relief in their tax return, reducing the year end liability.
with a vengeance, and with the basic Nil Rate band frozen at £325,000 Those who are likely to suffer the 60% marginal rate mentioned above
until 2029/30 even those with a house of average value could well be may wish to consult their IFA about investing further in their pension
within the scope of this tax by then. With the impact of the changes to ahead of the tax year end.
Business Property Relief for privately owned businesses (most notably There are special rules where the total of all contributions, whether
highlighted in the press in relation to family farms), and the fact that employee or employer contributions, exceed the Annual Allowance of
pension pots will soon be subject to IHT (whereas currently they are £60,000 (or your Tapered Allowance which could be as low as £10,000)
outside one’s Estate for IHT purposes) without taking forward planning and unused relief brought forward. Hence, professional advice (both
seriously many, many more Estates will face materially higher IHT bills. Investment advice and Tax advice) should always be sought before
Annual reliefs can still be valuable, particularly where they are used making any contribution.