A change in policy that will now see the family business inheritance tax threshold set at £2.5 million of assets from 6 April 2026 has been welcomed by the Confederation of Passenger Transport (CPT), which says it will benefit “thousands of family-owned coach operators.”
Under now-altered plans announced in the 2024 Budget, only the first £1 million of qualifying business assets were to be free from inheritance tax. Value beyond that would have qualified for 50% relief on the standard 40% inheritance tax rate.
Current rules give up to 100% relief on all qualifying assets, meaning that they can be passed on free of inheritance tax. The impact of the planned £1 million threshold gathered major public attention, with its lift to £2.5 million, as revealed on 23 December, coming after protests from farmers.
CPT previously said that the original plan with a £1 million threshold would have affected 71% of coach companies, with 46% believing that it would have threatened their viability.
In announcing the threshold change to £2.5 million, the government said it had “listened to concerns of the farming community and businesses about the reforms” although it notes that the new approach will maintain “the core principle that the most valuable agricultural and business assets should not receive unlimited relief.”
Spouses or civil partners will be able to pass on up to £5 million in qualifying assets between them before paying inheritance tax. The allowance will be transferable, and thus a surviving spouse or civil partner will be able to utilise that £5 million threshold, including where their spouse or civil partner has died before the policy is introduced.
Increasing the individual threshold to £2.5 million means that “a significant number” of coach operators will be removed from inheritance tax liability, CPT says.
Adds CEO Graham Vidler: “Coach operators are traditionally family businesses, many of which have been painstakingly built up over multiple generations. The sudden imposition of inheritance tax on these companies has been a major source of anxiety and a disincentive to investment.
“The coach industry only recently recovered from the disastrous effects of the COVID-19 pandemic. It was particularly problematic for this tax to be levied just as operators were being encouraged to invest millions in a shift to zero-emission vehicles.
“Coach operators will be pleased that the Treasury has listened to feedback from family businesses and has thought again about this tax hit. It will enable entrepreneurial families across the country to sleep a little more easily and to plan for an ambitious future.”
