Why IHT and succession planning is now urgent for GPs
Why IHT and succession planning is now urgent for GPs
Major changes are already planned that will increase the amount of inheritance tax that families of business owners will pay from April 2026. Aside from new restrictions to IHT business and agricultural property reliefs, from April 2027 families also face new charges when inherited pensions become liable to IHT.
Most GP practice owners will have a succession plan and Will in place to protect their family's future wealth – if you don't, now is the time! But even if you have existing plans, you should revisit those to check that they will remain tax-efficient in future.
Why planning before the Budget is good for General Practitioners
Firstly, any estate or business succession planning takes time. It's important to take stock of your business and personal assets and what they are truly worth – for example, do your business assets actually qualify for IHT business relief?
Factors such as excess cash in the business can affect whether business relief is available at all or whether only limited relief is allowed (i.e. restricted proportionately for non-trading assets held in the business). Whilst a GP Practice will not typically sell their business (the NHS contract is usually handed back to the ICB or passed to a new practice if the partnership ceases), these rules will apply to a pharmacy business.
Your practice premises
For example, business premises held in your own name will only qualify up to a maximum of 50% IHT relief on death so there may be no loss of relief under the new rules.
However, if you have held the business premises within a SSAS or SIPP to get 100% relief because a pension fund is currently outside the IHT net – this will also change from April 2027. As no relief will be available on deaths after that date, buying back the property from the pension may now be worth considering.
Secondly, sensible advance planning for the reduced business relief and agricultural property reliefs might involve making lifetime gifts of business or other assets to family members. However, there have been rumours that the Government is considering changing the current IHT rules on lifetime gifts in the Budget on 26 November.
If new limits for gifts are introduced or the current rules on 'potentially exempt transfers' (the seven-year rule) are abolished from Budget Day, this could severely reduce your succession planning options.
Similarly, if there are changes to pensions, such as a reduction in the amount of 'tax-free' cash you can take, this may also affect your wider plans for retirement and succession.
Where should you start?
Start with a review to identify any/all issues with your current assets and plans.
Then you need to carefully think through what you want to achieve in the future and talk to family members, as well as business partners, to establish how they feel about your plans. After that, putting all the tools in place to achieve your goals, from lifetime gifts to Wills and trusts and maybe changes to partnership agreements, can take time – so the sooner you start the better.
Of course, it's never wise to rush into action without taking advice first, but it is sensible to take a close look at your estate and succession plans again now - just in case quick action could help to protect your family's future.