Many farming and business families have historically viewed succession planning primarily as an inheritance tax ("IHT") exercise.
Increasingly, that assumption is no longer correct.
Higher Capital Gains Tax ("CGT") rates, reduced annual exemptions and less generous business reliefs have increased the cost of disposing of assets. At the same time, the IHT reforms taking effect from 6 April 2026 have prompted many families to revisit long-established succession plans.
In our experience, an increasing number of clients are reviewing structures that have remained unchanged for many years. The discussion is often no longer whether assets should pass to the next generation, but when and how that should happen.
As a result, CGT can no longer be considered in isolation. The key question is increasingly how to balance CGT, IHT, family succession objectives and long-term ownership.
Whilst there have been no confirmed announcements regarding further CGT reform, the Autumn 2026 Budget is likely to be closely watched by business owners, landowners, trustees and investors.
The current position (for 2026/27)
|
Position |
Rate |
|
Gains within unused basic rate band |
18% |
|
Gains above the basic rate band |
24% |
|
Trustees and Personal Representatives |
24% |
|
Annual Exempt Amount (individuals) |
£3,000 |
|
Annual Exempt Amount (most trusts) |
£1,500 |
The reduction in the annual exemption is particularly significant. As recently as 2022/23, individuals benefited from a £12,300 exemption. Today, many more transactions generate reportable gains and tax liabilities than would previously have been the case.
Business Asset Disposal Relief ("BADR") also provides less of a differential than historically. Qualifying gains were taxed at 10% until April 2025, increased to 14% from April 2025 and are taxed at 18% from 6 April 2026. The relief remains valuable, but the gap between mainstream CGT rates and BADR rates is now considerably narrower than it once was.
Why the CGT and IHT interaction matters
The most significant development for many rural and family-owned businesses is not the increase in CGT rates itself. It is the interaction between CGT and the IHT reforms taking effect from 6 April 2026.
Historically, many farming businesses, landed estates and family companies expected substantial protection through Agricultural Property Relief ("APR") and Business Property Relief ("BPR"). Changes to the availability of those reliefs from 6 April 2026 mean that some families are reconsidering whether assets should remain in an estate until death or whether succession should be accelerated through lifetime transfers.
That creates an important planning tension.
A lifetime transfer may reduce future IHT exposure but could trigger an immediate CGT liability unless hold-over relief or another relief is available.
Conversely, retaining assets until death may preserve the current CGT uplift on death, effectively rebasing assets for CGT purposes, but could increase overall IHT exposure depending upon the nature and value of the assets concerned.
For many families, there is no longer an obvious answer. Understanding the combined effect of both taxes has become more important than attempting to minimise either tax in isolation.
A practical example
Consider a farming family with agricultural and business assets worth £4 million.
Historically, the expectation may have been that those assets would ultimately pass to the next generation with substantial APR and BPR protection. In the current environment, the family may instead consider implementing succession plans during lifetime.
That may improve the future IHT position, but it could also trigger an immediate CGT exposure if assets are transferred without access to hold-over relief.
The planning question therefore becomes:
Does the reduction in future IHT justify the CGT consequences of transferring assets now?
Increasingly, this is precisely the analysis that advisers are being asked to undertake.
Hold-Over relief and other planning considerations
As more families consider lifetime succession planning, hold-over relief has become one of the most important reliefs available.
Where the statutory conditions are met, gains arising on certain gifts of qualifying business assets and certain transfers into trust can often be deferred rather than taxed immediately.
However, relief should never be assumed. One of the most common misconceptions is that assets qualifying for APR or BPR will automatically qualify for CGT hold-over relief. The tests are different and eligibility for one relief does not guarantee eligibility for the other.
This distinction is likely to become increasingly important as more families explore lifetime gifting strategies.
Rather than attempting to predict future Budgets, it is generally more useful to focus on practical planning risks. Areas that may continue to attract policy attention include:
None of these changes have been announced and taxpayers should not undertake transactions solely because of speculation regarding future legislation. However, where transactions are already being contemplated, understanding the potential consequences of delay remains sensible.
Practical actions before the Autumn Budget
Individuals, trustees and family businesses may wish to consider:
Conclusion
The greatest risk facing many taxpayers today is not that the Autumn 2026 Budget introduces an unexpected tax change.
It is that succession plans are implemented without fully understanding the interaction between CGT and IHT.
The current CGT regime is already significantly less generous than it was only a few years ago. At the same time, the IHT reforms from April 2026 mean that lifetime succession planning is likely to become increasingly common for many business owners, farming families and landowners.
In that environment, the most valuable planning exercise is often not attempting to predict future tax policy. It is ensuring that ownership structures, intended gifts and future exit strategies are reviewed before decisions become irreversible.
For many families, the challenge is no longer deciding whether succession should happen. The challenge is determining the most tax-efficient and commercially appropriate route to achieve it.
Important: Tax legislation and HMRC practice can change. The availability of reliefs depends on individual circumstances, and professional advice should be obtained before implementing any transaction.
If you wish to discuss this further, please get in touch with our Farms and Estates team here.
