The Government’s decision to increase the 100 per cent Agricultural Property Relief and Business Property Relief cap from £1 million to £2.5 million has been welcomed by advisers working with family farms and owner-managed businesses.

Sam Bacall, Partner at FFT Accountants in Manchester, says the announcement provides much-needed clarity after a prolonged period of uncertainty.

“This is very positive news,” he says. “A number of our clients have been grappling with this over the past year and the increase will bring some reassurance. Many company valuations are likely to fall within the new threshold, which feels far more appropriate for owner-managed businesses.”

In the Autumn Budget announcement a few weeks before the cap increase was made public, the Government also revealed that the allowance will be transferable between spouses and civil partners.

“A total allowance of £5 million across spouses is far healthier than £2 million,” Sam says.

“If used correctly, that could represent a potential Inheritance Tax saving of around £600,000, which I’m sure many will agree will be a meaningful difference for family businesses and farms planning for succession.

“Couples need to ensure arrangements are formally planned so the full benefit is captured. Issues such as incomplete valuation records, existing Wills or uneven ownership can result in part of the allowance being lost.”

The businesses most likely to benefit are those where owners are approaching retirement age and decisions can no longer be delayed.

Some families have already taken action in response to the previously announced £1 million cap. Sam says those strategies may still be valid.

“If share changes or gifts have already been made, they will probably still stand and achieve what was originally intended,” he says.

“However, anyone who has not yet made a decision should now re-review their position in light of the new threshold.”

After several policy announcements and reversals, Sam expects a period of stability.

“We would be surprised to see further changes under the current Government in the near term,” he says.

“The uncertainty created so far has already been significant, so is sensible to plan around the current rules, but not to rush into decisions.”

For further support with succession planning or Inheritance Tax planning, please visit www.fft.co.uk.