HMRC open consultation on APR/BPR restrictions and the impact on trusts- five key takeaways

Following on from the restrictions to Agricultural Property Relief (APR) and Business Property Relief (BPR) announced in the Chancellor's Budget on 30 October 2024, HM Revenue & Customs published, on 27 February 2025, an open consultation on how these changes will apply to trusts.

While a consultation is just that, in practice we learn much about the direction of travel and likely shape of the new rules when they take effect on 6 April 2026.

The five key takeaways from the consultation documents are:-

1. The £1M 100% APR/BPR allowance will be available to every individual, and importantly, it will refresh every seven years if used during lifetime, similar to the existing nil rate band. In practice this will make trust planning a popular means to reduce the impact of the changes. Everyone has the personal £1M 100% APR/BPR allowance, and everyone has access to a trust £1M 100% APR/BPR balance. And because of the availability of the nil rate band on a seven year refreshing cycle, and the availability of 50% APR/BPR, in practice that will mean that up to £1,650,000 can be placed into trust every seven years without any upfront Inheritance Tax and reducing the IHT exposure on death by £330,000 for every successful seven year cycle.
   
   
2. Where IHT becomes payable (on death, on transfer to trust or on trust 10 year charges and exit charges) as a result of the restrictions to APR/BPR, then that IHT can be paid over 10 years on an interest free basis. This will be helpful in many cases.
   
   
3. Trusts established on or after Budget Day by the same settlor will share a single £1M 100% APR/BPR allowance on a strict chronological basis. However, there was better news for trusts that had been established prior to Budget Day and have within them some 100% APR/BPR qualifying assets on 29 October 2024, as they will each have their own £1M 100% APR/BPR allowance.
   
   
4. Staying with trustees of existing trusts with APR/BPR property, now facing IHT on future 10 year charges, those trustees will have until the first 10 year anniversary occurring after 5 April 2026 to decide whether to make over the assets to beneficiaries with the benefit of unlimited 100% APR/BPR, or continue to run the trust and pay the 10 year charge to IHT. Such trustees will have more time to consider the overall impacts of the changes and whether outright transfers of assets to beneficiaries are appropriate.
   
   
5. Where a trust is not part of the relevant property regime (with its ten year charges and exit charges) but instead the trust assets are treated as if they are part of the estate of a beneficiary with for example a liferent or life interest (such as pre-Finance Act 2006 liferent trusts and liferents arising from trusts in wills), then there is no separate £1M 100% APR/BPR allowance for that trust. It will share the allowance of the liferent beneficiary.

Many other points are covered in the consultation which last until 23 April 2025. For our full analysis you may wish to read our longer insight on the HMRC Consultation on the changes to APR and BPR and the application to trusts.