This tax relief allows individuals to pass on certain business assets to their heirs or beneficiaries without incurring inheritance tax.
As the 6 April deadline approaches next year, uncertainty around BPR and trust planning is at an all-time high. This Q&A breaks down the most common concerns, providing clarity on what can still be done before the changes take effect and where specialist advice may be essential.
Q
Do I have to use all my BPR at once?
A
No. You can transfer only part of a business or business property. BPR is not an “allowance” — it applies to whatever you transfer, whether all or part.
Q
If I transfer business assets into a trust before 6 April, will BPR apply immediately?
A
Usually yes — provided:
you’ve owned the assets for two years, and
they qualify as relevant business property.
This can reduce the taxable value of the transfer to zero, avoiding the 20% lifetime IHT charge.
Q
Will transferring to a trust restart the two-year ownership clock?
A
No, not normally.
The trust can inherit your original ownership period if the business interest remains essentially the same.
However, if you transfer different assets or restructure significantly, the clock may restart.
Q
Will a transfer into a trust trigger immediate inheritance tax?
A
It can, but not if BPR reduces the value to zero.
If the business doesn’t qualify or only qualifies for 50% BPR, there may still be a charge.
Q
Do I need to complete the transfer before 6 April?
A
Not for BPR itself, but yes if:
you want the transfer to count as part of this tax year,
you are planning multiple trust entries over tax years,
you want the transfer done before potential rule changes or budget updates.
Q
Does BPR apply differently for a gift to children versus a trust?
A
No.
The type of transfer doesn’t affect whether BPR applies.
But the IHT treatment (PET vs. CLT) does differ.
Q
Will I lose BPR if the business is sold soon after I put it into trust?
A
Yes.
If the trustees sell the business, the trust may lose BPR and become exposed to IHT charges later.
Q
Can I put business property into more than one trust and still get BPR?
A
Yes, as long as each transfer qualifies at the time.
However, creating multiple trusts may impact:
trust reporting
10-year charges
effective nil-rate band allocation
Q
Does the business need to be valued before 6 April?
A
Yes, if:
you’re transferring before year end, or
you need evidence for HMRC.
A realistic valuation helps avoid disputes.
Q
Does CGT apply when transferring to a trust?
A
It can, but Hold-Over Relief is usually available for BPR-qualifying business assets.
This avoids immediate CGT.
Q
Do I still need to worry about the seven-year rule?
A
Yes.
A transfer into a trust is a CLT, not a PET.
The CLT limit is £325,000 per individual and refreshes every seven years.
Q
What happens if I don’t act before 6 April?
A
Nothing dramatic, BPR remains available, but tax-year planning opportunities might be lost. Currently 100% of all the value of relevant business property qualifies for relief. From 6 April 2026 this is capped at £1m per individual, with any excess only attracting 50% relief.
Take a look at our handy check list : BPR & Trust Planning Before 6 April
Confirm Eligibility for BPR
Ensure the asset qualifies as “relevant business property.”
Check the business is predominantly trading, not investment-based.
Confirm the asset has been owned for at least two years.
Decide the Type of Transfer
Gift to an individual (PET)
Transfer into a trust (CLT)
Sale or restructuring of business interests
Decide whether the transfer needs to be completed before 6 April for tax-year planning.
Assess Inheritance Tax Implications
Will the transfer create an immediate lifetime IHT charge?
Confirm whether BPR reduces the transfer value to £0, avoiding the 20% CLT charge.
Consider the impact on the nil-rate band.
Consider Capital Gains Tax (CGT)
Determine whether Hold-Over Relief is available.
If the transfer is before year-end, check if CGT planning is needed for this tax year.
Check Whether Timing Affects Relief
Confirm that BPR will still apply at the date of the transfer, not just at death.
Ensure any trust transfers are completed before 6 April if that timing is strategically beneficial.
Understand the Effect of Using BPR
Decide how much BPR-qualifying property to transfer (you do not need to use it all at once).
Check whether multiple trusts are intended and whether this affects the 10-year trust charge later.
Confirm Business Structure Issues
Has the business changed recently (e.g., trading levels, assets sold)?
Will the business be sold soon → does that create a risk of losing BPR?
Ensure corporate documents allow the transfer (company articles, shareholder agreements).
Get a Reliable Valuation
Ensure the valuation is up-to-date and supportable if HMRC reviews it.
Valuation may affect IHT on CLTs and future trust charges.
Understanding Voluntary National Insurance Contributions: A Guide
Some people choose to make voluntary National Insurance (NI) contributions to strengthen their eligibility for the UK State Pension and other contribution-based benefits. This is especially relevant for those who’ve worked abroad, are self-employed with lower income, or have gaps in their NI contributions history.
Why Consider Voluntary NI Contributions?
Voluntary NI payments can help individuals close gaps in their contribution records. To qualify for the full new State Pension, currently £11,973 annually (2025–26), you typically need 35 qualifying years of NI contributions. A minimum of 10 qualifying years is required to receive any State Pension.
Gaps can occur for various reasons, such as living overseas, low self-employment earnings, or time out of work. Voluntary contributions offer a way to make up these shortfalls and potentially increase future pension payments.
Types of Voluntary Contributions
There are two main categories:
Class 2 NI – Priced at £3.50 per week for the 2025–26 tax year. These are usually available to low-earning self-employed individuals and, in certain situations, to those living outside the UK.
Class 3 NI – These cost more (£17.75 per week) and are typically paid by individuals not eligible for Class 2. They count towards the State Pension only.
In contrast to Class 3, Class 2 contributions can also support eligibility for benefits such as Maternity Allowance and Employment and Support Allowance (ESA).
Who Can Pay?
Voluntary NI payments are generally allowed for the previous six tax years, with possible exceptions. However, not all individuals qualify. For example, women who previously opted into the “married woman’s reduced rate” before 1977 must cancel that election before paying voluntarily.
Additionally, to pay Class 2 NI, you must have either lived in the UK for three consecutive years or have paid standard NI contributions for at least three tax years.
What Counts as a Qualifying Year?
A qualifying year is one where your contributions (or credits) meet a certain threshold. Even without actual payments, such as when your income is low, certain credits or voluntary payments can help that year qualify.
Importantly, you don’t always need to contribute for the entire year. For example, someone with high earnings might meet the requirement in just a few months.
Is It Worth It?
Voluntary contributions can offer good value. Just one qualifying year can increase your State Pension by around £342 annually, meaning the cost of topping up with Class 3 payments could be recovered within a few years.
However, if you already have 35 qualifying years, additional payments might not improve your pension. That’s why it’s important to first check your pension record.
You can review your current State Pension forecast at gov.uk/check-state-pension, by calling the Future Pension Centre, or by requesting form BR19 by post.
Next Steps
If you’d like professional guidance with any of this, our team at ETC Tax is here to help. Drop us an email here.
Sweeping tax reforms affecting non-domiciled individuals in the UK came into effect on 6 April 2025. These new measures replace the long-standing system that allowed certain residents to benefit from favourable treatment on foreign income and assets. The shift aligns the UK more closely with a residency-based approach, with significant implications for those with international financial ties, including expatriates returning to the UK and UK nationals looking to emigrate permanently.
A Look Back: The Old System
Under previous rules, individuals not considered domiciled in the UK were able to use the remittance basis, a tax arrangement allowing foreign income and gains to remain outside the scope of UK tax, provided they weren’t brought into the country. In addition, non-UK assets were often excluded from Inheritance Tax (IHT) liability.
UK nationals, however, frequently struggled to qualify as non-domiciled for tax purposes, especially if they maintained strong ties to the UK, even after moving abroad.
What’s New?
The 2025 reform introduces a fundamental change: residency, not domicile, now determines tax status. The remittance basis is effectively abolished. Individuals who have been UK tax residents for more than four of the past ten tax years will now be taxed on their worldwide income and gains, regardless of whether they bring funds into the UK.
This change signals the end of domicile-based tax exemptions for long-term UK residents and moves toward a uniform system in which all taxpayers, regardless of origin, are treated similarly.
The Four-Year FIG Exemption
One key transitional measure is the Foreign Income and Gains (FIG) regime. It offers a four-year period of tax relief on overseas income and gains to individuals returning to the UK after at least ten consecutive years abroad. This exemption only applies if funds are kept offshore, any remittance into the UK during this period may trigger tax charges.
After the four-year window expires, global income and gains become fully taxable under standard UK tax rules.
Temporary Repatriation Offer
As part of the reform, a limited-time opportunity, the Temporary Repatriation Facility (TRF), allows individuals to bring historic offshore income and gains into the UK at reduced tax rates:
12% for the 2025/26 and 2026/27 tax years
15% for the 2027/28 tax year
This facility applies only to income and gains generated before 6 April 2025 that have not yet been taxed in the UK. It offers a strategic chance to “cleanse” offshore wealth at lower tax costs before standard rates apply.
Inheritance Tax Adjustments
Changes also extend to the UK’s inheritance tax framework. From 6 April 2025:
Those who have been UK tax resident for 10 of the past 20 years are now liable for IHT on their global assets.
IHT liability may continue for a number of years after someone leaves the UK, depending on their residence history.
UK-based assets remain subject to IHT for all individuals, regardless of where they live or claim domicile.
What It Means for You
These reforms represent one of the most significant shake-ups of the UK’s international tax landscape in recent memory. Individuals who previously benefited from non-dom status will find that many of those advantages have now disappeared — particularly those who have spent significant time in the UK.
Nonetheless, planning opportunities still exist, especially under the TRF and FIG provisions. Anyone with substantial foreign income or assets, or those considering a move to or from the UK, should act now to review their tax position.
Take Action
Given the complexity and long-term impact of these reforms, professional advice is crucial. Understanding how these changes apply to your situation can help you avoid unexpected liabilities and optimise available reliefs.
Next Steps
If you’re unsure how the new rules might affect your financial plans, please reach out to us and we can support you. Email us by clicking here.
Case of the month – Inheritance Tax Planning and Family Provision for a Vulnerable Beneficiary
Introduction
Our client approached us, intending to understand their current exposure to Inheritance Tax (IHT) and explore strategies to preserve and pass on wealth in a tax-efficient manner to their adult child who is unable to work. Ensuring long-term financial provision for him was a central concern in their planning.
Their estate includes a mix of cash, pensions, ISAs, and property, both residential and investment. While both have UK domicile and residency, they also intend to purchase a property in UAE for seasonal use. Wills are in place but require updating, and they are seeking clarity on structuring their estate for maximum tax efficiency, particularly with their childs welfare in mind.
The Issue
Based on the current value of their estate, we calculated an IHT liability of approximately over £1 million, leaving only 67% of the estate available for distribution. Our clients wished to explore ways to reduce this liability, safeguard their childs financial future without impacting entitlement to benefits, and understand the implications of setting up a Family Investment Company (FIC) or trust.
Our Solution
We advised on several key strategies to reduce their IHT exposure, while preserving control and flexibility:
Lifetime Gifts of Cash
The estate contains approximately £310,000 in liquid cash. We recommended making significant cash gifts now, as these qualify as Potentially Exempt Transfers (PETs). Provided they survive seven years from the date of gifting, these sums would fall outside their estates entirely. Taper relief would apply after three years for gifts exceeding the nil-rate band.
Regular Gifts Out of Income
With a gross salary of over £100,000 and modest living costs, our client can make regular gifts from surplus income. Provided these are consistent and well-documented, they are exempt from IHT, regardless of value. This approach is particularly effective for long-term planning.
Family Investment Company (FIC)
We explored the use of a FIC as a vehicle for holding investments, potentially funded via loans from surplus income or pension lump sums. A FIC allows the client to retain control through voting shares, while future growth can be attributed to a separate share class held by or for the benefit of their child. If the loan account is gifted, this becomes a PET, further reducing the estate’s value.
Use of Trusts
Trusts offer a valuable alternative or complement to a FIC. Each client could contribute up to £325,000 without incurring an immediate IHT charge. Trusts may also be more appropriate for vulnerable beneficiaries, depending on benefit considerations and access controls.
Will Planning and Property Structuring
We advised updating the wills to reflect current intentions, ensuring the main residence passes to their son. Holding the home as tenants in common and considering a co-occupation agreement may also support their goals. Plans to purchase a property in UAE should consider whether to hold it personally or via a company, given it remains within the UK IHT net due to domicile.
The Outcome
Through a combination of gifts, structural planning, and careful estate design, our clients could reduce their IHT liability from £1.078 million to approximately £388,000, a potential saving of £700,000. This ensures a greater portion of their estate (up to 80%) is passed on, with appropriate safeguards in place for their son’s financial future.
Major reforms to inheritance tax (IHT) are set to take effect
Major reforms to inheritance tax (IHT) are set to take effect in April 2026 and April 2027, with significant implications for business owners and investors. The government’s changes to Business Relief (BR) (formally known as Business Property Relief) could largely increase the taxable value of many estates. With IHT charged at 40%, the stakes are high.
This article explores what’s changing and why it matters for you.
APRIL 2026
What’s changing with Business Relief?
Currently, Business Relief allows shares in trading companies or trading groups to be passed on free of IHT. Broadly, in practice, this means:
If someone owns shares in a trading company (or a qualifying trading group) worth £10 million, the full £10 million is exempt from IHT.
The value is treated as being outside of their estate when they die.
From April 2026, however, the rules will change:
Only the first £1 million of value will qualify for the BR exemption.
Any value above £1 million will still qualify for BR, but at a reduced rate of 50%. The remaining 50% will fall into the estate and potentially face a 40% IHT charge.
There is currently no ability to transfer the £1m allowance onto a spouse or civil partner.
This means that from April 2026, 50% of £9m of a £10m business could be taxable, creating an IHT liability of £1.8m on death.
This represents a significant shift in how business wealth is taxed, highlighting the need for proactive planning before April 2026 for business owners.
How These Changes Apply to Agricultural Relief
Agricultural Relief works similarly to Business Relief, providing up to 100% exemption from IHT for qualifying agricultural property. However, like Business Relief, Agricultural Relief will also be affected by the tightening of rules in the same way.
Agricultural relief is primarily available in two scenarios;
To a farmer who owns the land and buildings and uses them in their own business; and
To a landowner who is letting out agricultural land or buildings to a farmer.
APR already requires strict eligibility conditions, so landowners and farmers should review whether their property qualifies under current rules and explore succession strategies before any changes are implemented.
APRIL 2027
Pensions and IHT
Pensions have long been a valuable tool in succession planning because, under current rules, unspent defined contribution pension pots were outside of the estate for IHT purposes. This means they can pass to beneficiaries without facing inheritance tax.
Current Rules
In defined contribution schemes, any unused scheme funds can normally be passed on and paid out to beneficiaries in the form of death benefits.
In defined benefit schemes, there is no dedicated fund that can be inherited, but there may be specific death benefits which become payable, such as a lump sum death benefit or a set amount of pension to a dependant.
Generally, if the pension holder dies before age 75, beneficiaries can usually take the remaining pension funds tax-free.
If death occurs after age 75, benefits are not subject to IHT, but they are taxed at the beneficiary’s marginal income tax rate when withdrawn.
Upcoming Changes
The government has announced significant reforms that will impact pensions and inheritance tax:
From 6 April 2027, most unused pension funds and death benefits will be included within the value of the estate for IHT purposes.
This means they could be subject to a 40% IHT charge. For those who pass after age 75%, this would apply then before any income tax is applied, creating a potential double taxation issue.
For example, if a pension holder dies after age 75 with £100,000 in their pension pot, and the beneficiary is an additional rate taxpayer, the effective tax rate could be as high as 67%, with only £33,000 remaining for the beneficiary.
These changes mean pensions will no longer be a guaranteed IHT-free inheritance, and they are likely to become a core part of estate planning discussions going forward.
It is driving individuals to now reconsider their retirement plans, particularly concerning how they fund their lifestyle. This was one of the aims of the government’s decision – to ensure pension pots are being used for their intended purpose: to provide for retirement, rather than being used primarily as tools for passing on tax-free wealth.
What other changes are on the horizon?
The Autumn Budget 2025 is attracting significant attention, with Chancellor Rachel Reeves expected to make large changes amid speculation of substantial tax increases under the Labour government. While inheritance tax (IHT) was a major focus of the previous budget, this year’s budget is likely to prioritise other taxes. Nevertheless, some IHT reforms may still be introduced. Analysts have identified several potential areas of focus:
The freeze on tax-free allowances (nil-rate bands) was previously extended until 2030, which continues to expose estates to the effects of fiscal drag. It’s possible this freeze could be extended further.
Under current rules, individuals can make lifetime gifts free of IHT provided they survive for seven years after the gift. There is currently no limit on the value of these gifts if this timeframe is met.
There is discussion within the government about tightening these gifting rules, which could potentially include a lifetime cap on amounts that can be gifted before death.
Taper relief currently reduces the rate of IHT applied to gifts if the donor dies between three and seven years after making the gift. There is the potential for them to reconsider this relief.
Given the pace of potential reforms, individuals should review estate planning strategies now rather than wait for the Autumn Budget.
Here at ETC Tax, we understand that these upcoming inheritance tax reforms will affect individuals in different ways depending on their circumstances. We can discuss your specific situation, explain how these changes might impact you, and help identify strategies to protect your wealth and achieve your estate planning goals. Do not hesitate to get in touch today if you would like to discuss your affairs.
Double Tax Treaties: What They Are and Why They Matter
Introduction to Double Tax Treaties
Double tax treaties (also known as Double Taxation Agreements/DTAs) are formal arrangements between two countries that aim to prevent individuals and businesses from being taxed twice on the same income. As global mobility and cross-border trade continue to grow, these treaties play an increasingly vital role in simplifying international tax compliance, encouraging foreign investment, and ensuring fair taxation between jurisdictions.
Double tax treaties allocate taxing rights between countries.
For example, a treaty may specify whether income such as dividends, royalties, employment income, pensions, or capital gains should be taxed in the country where the income arises or where the recipient resides, or both, with relief given in the residence country. Treaties often define ‘permanent establishment’ thresholds to determine when a foreign company becomes liable for tax in the other country.
In addition to clarifying who gets to tax what, DTAs provide mechanisms for tax relief. A UK resident earning income in a treaty country might be exempt from tax in the UK on that income or may be eligible to claim a credit for tax paid abroad, depending on the treaty provisions. These agreements typically also include dispute resolution mechanisms and clauses that allow for the exchange of tax information between countries, helping to prevent tax evasion and promote transparency.
The UK currently has over 130 double tax treaties in force, covering most of its major trading partners. These treaties are essential for both expatriates and multinational businesses seeking clarity and consistency in their tax affairs.
UK/India Social Security Agreement
A recent development in international tax cooperation is the UK/India Double Contributions Convention (DCC), which complements the existing tax treaty between the two nations. Signed in 2025 as part of the wider UK/India Free Trade Agreement, the DCC is a social security coordination agreement designed to prevent individuals and their employers from having to contribute to two social security systems at the same time during temporary cross-border assignments.
Under domestic rules, workers posted from the UK to India (and vice versa) could previously become liable for contributions in both countries after the first 52 weeks of their assignment. The DCC aims to eliminate this dual liability for assignments of up to three years.
Once in force, which is expected by mid-2026, the agreement will allow Indian professionals posted to the UK to continue contributing to India’s Employees’ Provident Fund (EPF), provided they obtain a Certificate of Coverage from Indian authorities. In turn, UK-based employees sent to India will remain under the UK’s National Insurance system. After 36 months, local social security obligations resume in the host country from day one.
Importantly, the DCC is limited in scope to contribution liability; it does not affect eligibility for benefits or pension aggregation. It also does not alter immigration or visa rules. However, the financial and administrative relief it offers is significant. For some, the savings on employer contributions could amount to tens of thousands of pounds per employee over the three-year exemption period.
Conclusion
Whether you’re an international assignee, an expat tax advisor, or a business planning overseas expansion, understanding the interaction between double tax treaties and social security agreements like the UK/India DCC is essential.
These instruments reduce complexity and cost, while offering legal clarity for cross-border operations. As more such agreements come into effect, it’s critical to seek up-to-date advice to ensure full compliance and to maximise relief available under treaty provisions. If ETC Tax can help in any way, please get in contact with us.
