Do new inheritance tax reforms affect you?
EQ Accountant’s Anna Coff discusses the impact on dental practices
Recently, there have been significant reforms to Inheritance Tax (IHT), with implications that extend across industries, including dental practices. These changes, set to take effect in April 2026, focus on the reduction of Business Property Relief (BPR) and the inclusion of pension funds in the IHT nil-rate band, creating new challenges for business owners. For dentists, whose practices often represent a considerable proportion of their estate and have benefitted from very favourable pension schemes over the years, these reforms present specific concerns that require proactive planning to mitigate potential financial risks.
Understanding the reforms: BPR and pension funds
Under the new rules, BPR relief will reduce to 100 per cent on business assets valued up to £1 million and to 50 per cent on amounts above that threshold. This change means that businesses previously sheltered from IHT through full BPR on their value may now face tax liabilities upon inheritance. Although most dentists are not still pulling teeth with a zimmer frame in tow having sold up to enjoy retirement, death doesn’t always wait for old age.
In addition, pension pots – long considered an efficient vehicle for passing wealth tax-free – will now count towards the £325,000 IHT nil-rate band. For dentists, who often build significant pension funds as part of their retirement planning, this adjustment could considerably shrink the available tax-free allowance for other assets, including their practice and property, or indeed, annihilate it a few times over.
The impact on dental practices
Dentists, particularly those who own and operate their practices, could experience several financial and operational consequences due to these reforms. With these changes on the horizon, it’s imperative for dental practice owners to take a proactive approach to estate planning.
This could include considering life insurance, wills, the use of trusts or gifts in lifetime, to name a few. Implementing sound succession strategies will ensure that, even in the face of increased tax liabilities, dental practices remain resilient and poised for long-term success. For further guidance on protecting your practice from the impact of IHT reforms, contact EQ today.
