When Rachel Reeves stood up in Parliament on 30 October 2024 to deliver her first Budget, a lot of people were nervous. There had been weeks of speculation about inheritance tax changes. Would the rates go up? Would allowances be cut? Would property be targeted?
As it turned out, the changes were more nuanced than the headlines suggested. But for anyone thinking about long-term wealth planning, the direction of travel was unmistakable.
Let's go through what actually changed — and what it means if you own a property company.
Business Property Relief: the headline change
The biggest announcement was the reform of Business Property Relief (BPR) and Agricultural Property Relief (APR). These are the reliefs that allow qualifying business and farming assets to pass on free of inheritance tax — or at a reduced rate.
Until now, BPR gave 100% relief on qualifying trading business shares, with no upper limit. A family business worth £5m? No IHT. £20m? Still no IHT. It was remarkably generous.
From April 2026, that changes. The new rules cap the 100% relief at the first £1 million of qualifying assets. Anything above £1m gets relief at 50% — meaning it's effectively taxed at 20% instead of 40%.
This was big news for farmers and trading business owners. A family farm worth £3m, which previously would have passed on completely free of IHT, will now face a potential tax bill on the value above £1m.
But here's what property company owners need to understand
If you own a property investment company, this change doesn't actually make things worse for you. Why? Because property investment companies were already excluded from BPR.
HMRC has always treated property investment as "holding investments" rather than "trading." Your shares have never qualified for Business Property Relief. The full value has always been exposed to 40% IHT.
The irony: The BPR cap is being treated as dramatic news, but for property company owners, it changes nothing directly. You were already in the worst position. If anything, it's a reminder that the reliefs other business owners relied on are now being scaled back too.
What it does tell us is that the government is tightening IHT reliefs, not loosening them. And that should focus the mind.
The nil rate band: frozen again
The nil rate band stays at £325,000. It's been at that level since 2009. The Budget confirmed it will remain frozen until at least 2030.
The residence nil rate band also stays at £175,000, frozen until 2030.
In real terms, these allowances are shrinking every year. Property values go up. Portfolio values go up. But the tax-free threshold stays exactly where it is. More and more estates are being pulled into the IHT net — not because they've become dramatically wealthier, but because the thresholds haven't moved in over two decades.
Sarah and David own a family home worth £500,000 and a property company valued at £1.4m. Their combined nil rate bands give them £1,000,000 tax-free.
Their estate: £1,900,000. Taxable amount: £900,000. IHT bill: £360,000.
Five years ago, their property company was worth £900,000. The same calculation would have produced an IHT bill of £160,000. The threshold didn't move — their assets did.
Pensions: the big surprise
This one caught a lot of people off guard. From April 2027, unused pension funds will be brought into your estate for IHT purposes.
Until now, pensions have sat outside your estate. If you died with £500,000 in your pension, it could pass to your beneficiaries free of IHT (though income tax might apply on withdrawals). It was one of the most powerful estate planning tools available.
The new rules change that. Your pension pot will count as part of your estate, subject to IHT at 40% above your available allowances.
For property company owners, this is significant. Many have been using a "spend the pension, keep the company" strategy — drawing down personal savings and pensions first, leaving the property company intact. With pensions now inside the IHT net, the overall exposure just got larger.
The details are still being worked out
The government has published a consultation on exactly how the pension changes will work. There are technical questions about how pension values interact with existing nil rate bands, how death benefits will be taxed, and how schemes will report values to HMRC. We don't have all the answers yet — but the principle is clear.
What does all this mean for you?
If you step back and look at the pattern, the message from this Budget is straightforward:
- BPR capped — reliefs that protected trading businesses are being reduced
- Nil rate bands frozen — your tax-free allowance is worth less every year in real terms
- Pensions brought into estates — a major planning tool is being taken away
The direction of travel is clear. More assets will be caught by IHT, not fewer. The window for effective planning is narrowing.
For property company owners specifically: You were already excluded from BPR. Your nil rate bands haven't moved in nearly 20 years. And now your pension is going to count too. The case for restructuring and planning has never been stronger.
Is this the time to panic?
No. Absolutely not. But it is the time to act with purpose.
The Budget didn't change the fundamental strategies available for reducing IHT on property company shares. Share restructuring, minority discount planning, trust arrangements, lifetime gifting — these all still work. The tax legislation hasn't targeted those approaches.
What has changed is the urgency. Every year the nil rate band stays frozen, your exposure grows. Every asset that gets pulled into the IHT net makes the bill larger. And the earlier you start planning, the more options you have — particularly anything involving the seven-year rule for lifetime gifts.
Waiting doesn't make the problem smaller. It makes it bigger.
Tom owns a property company worth £2m. He's 62 and in good health. If he starts restructuring now and survives seven years, he could move significant value out of his estate entirely. If he waits until he's 70, the same strategy becomes riskier — and the company may be worth even more by then.
What should you do next?
The first step is understanding exactly where you stand. What's your estate worth today? What are your available allowances? What's the projected IHT bill if nothing changes?
Once you have those numbers, you can start looking at what's possible. The strategies vary depending on your age, family situation, company structure, and what you want to achieve. There's no one-size-fits-all answer — but there are well-established approaches that work for property company owners.
The Budget made the landscape a bit more challenging. But the planning opportunities are still there — for now.
Want to understand how the Budget affects your situation?
We'll look at your property company, your allowances, and your current exposure — and show you what your options are. No obligation, no jargon.
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