The Intermediary – July 2026 - Flipbook - Page 44
BUY-TO-LET
Opinion
Portfolios and
succession planning:
The overlooked risks
or many property
investors, a buy-tolet (BTL) portfolio
represents years of
careful acquisition
and entrepreneurial
effort, oen starting with a single
investment and expanding gradually
as values increase and equity is
recycled. The focus is typically on
income generation and the day-today management of the portfolio
in the here and now. What is oen
overlooked is succession planning
– what will happen to the portfolio
when the property investor dies or if
they become incapacitated by a longterm illness or accident?
It is easy to understand why these
difficult questions are avoided.
However, this oversight can,
unfortunately, be very costly.
It is important not to lose sight of
the fact that BTL portfolios are rarely
just a collection of bricks and mortar.
They represent a combination of
assets, debt, risk-taking, personal
knowledge and management
expertise, each of which plays a critical
role in the success of the portfolio.
Effective succession planning must
address not only how properties pass
on death, but also how the associated
borrowing and the management of the
portfolio will be dealt with by those
le behind.
F
Inheritance Tax exposure
Business Property Relief (BPR) is an
Inheritance Tax (IHT) relief which
applies to qualifying trading business
assets, providing relief at 100% on
the first £2.5m of value and 50%
relief thereaer (from April 2026).
A portfolio is oen a successful,
long-established enterprise, so surely
it qualifies for BPR? Unfortunately,
that is usually not the case.
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The Intermediary | July 2026
One of the most common
misconceptions is that a BTL
portfolio will be treated as a business
for IHT purposes. In reality, most
are classified as investment assets
rather than trading activities. They
do not qualify for BPR, leaving the
underlying value aer deduction of
any available allowances fully exposed
to IHT at 40%.
Inheritance Tax is payable within
six months of the end of the month
in which the individual dies, aer
which interest begins to accrue on any
unpaid tax. HMRC currently charges
interest at 7.75%. While inheritance
tax aributable to property can be paid
by instalments over 10 years, interest
will still apply.
Families are oen caught in a
difficult position: the tax must be paid
to obtain the Grant of Probate, but
the Grant of Probate is required to sell
property or shares to release funds to
pay the tax.
The inherent illiquidity of property
therefore creates real challenges.
Although portfolios may be valuable
on paper, it is uncommon for there
to be sufficient cash readily available
to sele a significant Inheritance Tax
liability. Executors and beneficiaries
may find themselves with lile
choice but to sell properties to raise
funds. This can lead to forced sales
at inopportune times, undermining
carefully built portfolios and
disrupting long-term family planning.
When undertaking any Inheritance
Tax planning therefore it is vital
that the property investor’s estate
is considered in the round. Careful
thought must be given to the
availability of cash and how an
Inheritance Tax liability arising on
the property portfolio might be seled
on their death in order to mitigate the
risk of any forced sales.
JESSICA GODFREYWITHEY
is partner in the private client
advisory team at Birketts LLP
Mortgages and risk
Alongside tax exposure, mortgage
finance introduces another
layer of risk that is frequently
underestimated. Many portfolios are
financed on terms that are closely
linked to the individual landlord.
Even where properties are held
through corporate structures, lenders
oen rely on personal guarantees, the
investor’s experience and their wider
financial position.
On death or serious incapacity, this
personal element can quickly become
a point of weakness. Loan agreements
may allow lenders to review terms,
require additional security or, in some
cases, call in borrowing.
Personal guarantees may be
triggered or reassessed. While lenders
are not inherently adversarial,
uncertainty and delay can create
pressure at precisely the wrong time.
Beneficiaries may also face
difficulties where refinancing
becomes necessary.
They may lack the experience,
income profile or risk appetite that
originally supported the borrowing,
and lending criteria may have changed
significantly since the loans were
