06 SPRING PROTECT NEWSLETTER The impact being, as property values and personal wealth grow over time, more estates may become liable for IHT, increasing the tax burden on beneficiaries. 2. Reforms to Agricultural and Business Property Reliefs • Current Relief: Agricultural Property Relief (APR) and Business Property Relief (BPR) can offer up to 100% IHT relief on qualifying assets. • Changes Effective April 2026: ◊ Relief Reduction: The 100% relief will apply only to the first £1 million of combined agricultural and business property. Values exceeding this threshold will receive a 50% relief. ◊ AIM Shares: Shares listed on growth markets, such as the Alternative Investment Market (AIM), will see BPR reduced from 100% to 50%. The impact of these being that high-value estates, particularly those with substantial agricultural or business assets, may face increased IHT liabilities. This change could affect succession planning for family businesses and farms. 3. Inclusion of Pension Funds in IHT • Current Exemption: Unused pension funds and certain death benefits are typically exempt from IHT when passed to beneficiaries. • Change Effective April 2027: Most unused pension funds and death benefits will be included in the persons deceased estate for IHT purposes. Impact: Beneficiaries may face higher tax liabilities on inherited pension assets, prompting individuals to reassess retirement and estate planning strategies. 4. Shift to a Residence-Based System • Current System: IHT liability is determined based on an individual's domicile status. • Change Effective April 2025: The system will transition to a residence-based framework, where individuals residing in the UK for at least 10 out of the last 20 tax years will be considered "long-term UK residents" for IHT purposes. The impact being non-domiciled individuals residing in the UK may become liable for IHT on their worldwide assets, necessitating a review of their estate planning. There have been significant reactions and criticisms to the proposed changes, with business leaders like Sir James Dyson argue that these changes could harm family businesses, potentially leading to job losses and reduced economic contributions. Even some Labour MPs from rural constituencies, have expressed concerns that the new IHT rules could adversely affect smaller family farms, urging for higher relief thresholds. What it means, is that the changes to IHT levels represent a significant shift in the UK's taxation landscape. It does open up estate planning opportunities to a broader client base including the use of a number of tools that can lead to protection advice being sought by huge cohorts of people, who previously didn’t understand the value of such policies. Claims Season Yes the claims season is upon us when most Insurers will tell us what percentage have and haven’t been paid, and I thought I would take the opportunity to highlight one
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