Businesses face rising inheritance tax pressure amid Business Property Relief reform
Yesterday, Natalie Butt, Director, Private Clients, gave evidence at the House of Lords Finance Bill Sub-Committee as part of its inquiry into draft legislation affecting Business Property Relief (BPR) due to take effect in April 2026.
Crowe was invited following its formal response to Parliament’s Call for Evidence on ‘Reforming Inheritance Tax: unused pension funds and death benefits – Reforms to each Agriculture Property Relief and BPR.’
Natalie expressed concern that the upcoming changes will be significant, and that the full extent of their impact on business owners, individuals, and the wider economy is not fully understood. Natalie also voiced doubts about whether HMRC is adequately equipped to manage the increased complexity and the expected rise in Inheritance Tax (IHT) valuations resulting from these reforms.
Interestingly, new data obtained by Crowe via a Freedom of Information Request found that, in the tax year 2023/24, it took an average of 18.3 months for HMRC to resolve an IHT enquiry.
Additionally, of 4,171 IHT enquiries opened in that same year, 1,706 cases were referred to HMRC’s Shares and Valuations team. With the introduction of the £1 million BPR allowance, this figure is set to increase exponentially.
Natalie Butt, Director, Private Clients at Crowe, commented:
“Most business owners and individuals are simply not ready for the upcoming changes. From our conversations with clients and intermediaries, the vast majority are unaware of the changes and only a few are actively trying to plan.
The changes are significant and merited a measured and considered approach to fully understand the implications of such sweeping changes across an area of tax that has seen little change in a generation.
It is clear that the changes will affect significant numbers of families, individuals, Executors, businesses, and their employees. There is also the question of whether enough consideration has been given to the potential adverse impact to the economy.
Not only is there concern that businesses' do not have the liquidity to deal with these changes, but HMRC’s preparedness has to be questioned and whether it will be able to handle the significant increase in IHT valuations which is likely to arise from the changes.
As the data obtained from our Freedom of Information request reveals, IHT enquiries are already taking a substantial amount of time to resolve. Notably, nearly half of these enquiries are being referred to HMRC’s Shares and Valuations team. With the introduction of the £1 million BPR allowance, valuation disputes are expected to rise sharply. Therefore, the question remains: will HMRC be equipped to handle the surge in cases?
Without more consideration into the impact of the changes, we expect the delays in the probate process and enquiries to rise as the news rules increase the complexity and accessibility of the IHT and probate process. In making the IHT system even more complex, applying for probate will increasingly be out of reach for unadvised taxpayers.”