Changes to inheritance tax (IHT) rules, introduced in the latest government budget, could significantly affect equestrian businesses such as studs, riding schools, and livery yards. Owners are being urged to seek professional financial advice to navigate these changes effectively.
Overview of the New Inheritance Tax Rules
In the Government’s autumn budget, announced on 30 October, Chancellor Rachel Reeves introduced reforms to Agricultural Property Relief (APR) and Business Property Relief (BPR). Currently, individuals can claim 100% relief on qualifying agricultural land, property, and business interests, shielding them from inheritance tax.
However, starting 6 April 2026, this full relief will be capped at £1 million for combined agricultural and business properties. Any value exceeding this threshold will only qualify for 50% relief from IHT
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Impact on Equestrian Businesses
While the primary focus has been on farmers, these changes are set to affect equestrian businesses too, particularly stud owners who rely on APR.
Nicola Glass, an independent financial adviser at Integrity365, explained, “In the past, a farmer or stud owner’s beneficiaries could claim unlimited relief under APR and potentially BPR. But with this cap, assets exceeding £1 million in value will be subject to a 20% inheritance tax on the excess.”
For equestrian studs, this limit could quickly be surpassed when considering land, buildings, and other qualifying assets. Similarly, livery yards and riding schools, while not typically eligible for APR, may qualify for BPR. These businesses could face similar financial challenges under the new rules.
Example Scenario: Financial Implications for a Stud Owner
Anne Stables, the sole owner of a profitable stud farm, illustrates how these changes might play out:
- Anne’s estate includes £1.3 million in APR/BPR-eligible assets, a home worth £400,000, and £100,000 in savings.
- Under the current rules, the stud farm would pass tax-free, leaving only the home and savings potentially subject to IHT. With her IHT bands totaling £500,000, no tax would be due.
- From 2026, only £1 million of the stud farm’s value will be exempt. The remaining £300,000 will qualify for 50% relief, resulting in a 20% tax liability of £60,000.
This scenario underscores the importance of professional advice and strategic IHT planning.
Steps to Mitigate Inheritance Tax Liability
Ms. Glass advises equestrian business owners to take proactive measures, including:
- Valuing all assets: Understand the full scope of your estate.
- Consulting with advisors: Seek guidance from tax professionals and solicitors.
- Exploring planning options: Consider insurance to cover liabilities or gift assets during your lifetime to reduce taxable estate values.
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Advice for Business Owners
A British Horse Society spokesperson emphasized the importance of seeking professional guidance:
“The impact of these changes will depend on individual circumstances, so riding centre and livery yard owners must understand how they might be affected. Clear legal advice can help owners make informed decisions.”
Final Thoughts
These inheritance tax reforms concern farmers as well as the broader rural and equestrian community. Early action can help mitigate potential tax liabilities, ensuring the long-term sustainability of equestrian businesses. Owners should prioritize financial planning to protect their legacies and navigate the upcoming changes effectively.
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