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Inheritance Tax (IHT) planning has become increasingly critical for UK business owners. With legislative changes coming into force from April 2026, the traditional protections around Business Property Relief and Agricultural Property Relief are being eroded. Here’s how to adapt, protect your business legacy, and potentially save hundreds of thousands in tax. Why Business Owners Must Act Now Inheritance Tax receipts reached a record £6.7 billion in 2022–23, with 31,500 estates taxed—13% more than the year before. From April 2026, new rules will cap relief on qualifying business and agricultural assets at £1 million per estate. Above that cap, only 50% relief applies—leading to a 20% IHT rate on the excess value. From April 2027, pension pots will also be included in IHT calculations, increasing exposure further. Without timely planning, business owners risk leaving behind substantial tax bills for their beneficiaries. Strategic planning now could help protect both business continuity and your family’s financial security. Understanding Current IHT Reliefs That Benefit Business Owners Business Property Relief (BPR) / Business Relief (BR) Under current UK law, Business Property Relief (also known as Business Relief) provides up to 100% IHT relief on qualifying business assets, such as: Unlisted shares or securities in a trading company Sole trader or partnership business interests Land, buildings, or machinery used in a business you control To qualify, assets typically must be held for at least two years before death or gifting. Relief is currently uncapped, allowing business owners to pass on companies worth millions without incurring IHT. However, non-trading companies, investment-based businesses, or surplus cash reserves may not qualify. It’s essential to determine whether your business structure and balance sheet align with BPR rules. Residence Nil-Rate Band (RNRB) & Standard Nil-Rate Band Every individual in the UK gets a £325,000 standard nil-rate band. When your main residence is passed on to direct descendants, you may also claim the Residence Nil-Rate Band, worth up to £175,000. Together, a couple could shelter up to £1 million of property from IHT. However, these allowances are gradually tapered for estates over £2 million, and business assets don’t always benefit directly. Combining these with business relief and lifetime gifting is the most effective way to structure your estate. Gifts, Charitable Giving, and Trusts Making gifts during your lifetime can reduce your estate’s value. Provided you live for seven years after the gift, it becomes exempt from IHT. Even if you die sooner, taper relief may reduce the tax due. Charitable donations of 10% or more of your estate reduce the IHT rate from 40% to 36%. Additionally, trusts (such as Discounted Gift Trusts) can remove value from your estate while still providing income. What’s Changing from April 2026—and What You Should Do New Cap on Business and Agricultural Relief From 6 April 2026, the relief for business and farming assets will be capped at £1 million per estate. Currently, a trading business worth £2 million would receive 100% BPR. Under the new rules, only £1 million qualifies fully; the remainder receives 50% relief, incurring 20% tax liability. Relief Not Transferable Between Spouses Currently, unused reliefs can pass to a surviving spouse. The upcoming reforms remove this flexibility: the £1 million cap will apply per estate, not per person, even within married couples. Families relying on successive spousal exemptions may face large unexpected bills. Pension Pots Become Taxable Another significant reform comes into force in April 2027, when unused pensions will be included in the deceased’s estate for IHT. Previously, pensions could be passed tax-free to beneficiaries under age 75. This change means more estates will exceed the nil-rate threshold. Strategic Planning Steps for Business Owners 1. Update Your Succession Plan and Will Review your will and business succession plan. Consider using nil-rate band discretionary trusts to shelter allowances. If you haven’t updated your estate documents since before these proposed reforms, now is the time. 2. Gift Business Assets Before the Cap Takes Effect By gifting business interests before April 2026, you could secure the current full relief on their value. If you survive for seven years, the gift may become fully exempt from IHT. Use gift inter vivos insurance to mitigate risk if death occurs within seven years. 3. Use Whole-of-Life Insurance in Trust A whole-of-life insurance policy placed in trust can provide beneficiaries with a tax-free lump sum to pay IHT. This is particularly useful when estates contain illiquid assets such as business property or land. Policy premiums are typically small relative to the potential tax liability. 4. Invest in BPR-Qualifying Opportunities Investing in AIM-listed shares or qualifying private trading companies can attract BPR after just two years. However, these investments are high risk and require professional guidance. At Sure Wealth, we help clients assess whether BPR-qualifying investments align with their risk tolerance and financial goals. What a Strategic Sequence Could Look Like Valuation : Obtain a professional valuation of your estate, including business interests, property, pensions, and personal wealth. Structure Lifetime Gifts : Begin gifting surplus assets before April 2026 to maximise use of current reliefs. Set Up Trusts : Use discounted gift trusts and family investment companies to move wealth outside your estate. Purchase Insurance : Cover projected IHT liability with a policy in trust. Update Will and LPAs : Ensure your wishes are recorded and protections are in place. Review Regularly : Revisit your plan annually or when major legislation changes occur. Why Timing Is Crucial Waiting until 2026 or later could expose your business to substantial tax that would have been avoidable under current rules. Acting now gives you more tools, more exemptions, and greater control over how your legacy is preserved. Furthermore, pension IHT inclusion from April 2027 means even those without traditional estates may be affected. If you have multiple pension pots, their combined value could exceed the £325,000 threshold. Why Work with Sure Wealth? At Sure Wealth , we specialise in helping entrepreneurs, company directors, and high-net-worth individuals protect their wealth. We tailor our strategies to your business structure, family situation, and long-term vision. Our team brings together expertise in: Business succession planning Inheritance tax mitigation Estate preservation Trust and investment strategies Insurance-based estate protection By working with us, you can: Lock in valuable tax reliefs before they are capped or removed Reduce uncertainty for your family and business Build a tax-efficient legacy that reflects your values and hard work Take the Next Step Inheritance Tax is no longer a concern for only the ultra-wealthy. With frozen thresholds, rising asset prices, and new taxable categories, more business owners than ever are being pulled into its scope. Don’t wait until it’s too late. Start your personalised inheritance tax strategy today. Call us on 0203 551 1090 or visit our contact page Let Sure Wealth help you build a smart, forward-thinking plan to safeguard what matters most. This content is for informational purposes only and should not be considered financial or legal advice. Always consult with a qualified professional.
Inheritance Tax (IHT) planning is a vital concern for entrepreneurs, business owners, and families with established businesses. As the government introduces major changes to Business Property Relief (BPR) from April 2026, understanding how Business Relief works has become even more essential. This blog explores how entrepreneurs can legally reduce their IHT liabilities and secure their business legacy for the next generation. What Is Business Relief? Business Relief (BR), formerly known as Business Property Relief (BPR), is a form of inheritance tax relief introduced to prevent the breakup of family-run businesses upon the death of an owner. It allows qualifying business assets to be passed on free of IHT—or with significantly reduced tax—provided certain conditions are met. Types of Assets That Qualify Unquoted shares in a trading company (100% relief) Shares in AIM-listed companies (currently 100% relief, but changing) Business interests such as sole trader enterprises or partnerships Land, buildings or machinery used in a qualifying business (50% relief) Minimum Ownership Period To qualify for relief, the business asset must be owned for at least two years before the date of transfer (via death or gift). Why Business Relief Matters for Entrepreneurs 1. Safeguards Business Continuity Without BR, families may be forced to sell all or part of the business to cover IHT liabilities. BR protects against this by enabling ownership transfer without a massive tax hit, keeping the business intact and operational. 2. Offers Substantial IHT Savings Business Relief can reduce the taxable value of qualifying assets by up to 100% , potentially saving heirs hundreds of thousands in inheritance tax. For example, a family business worth £1 million could pass tax-free, saving up to £400,000 in IHT. 3. Faster Tax Efficiency Than Gifts While gifts can also reduce IHT, they are subject to the seven-year rule. Business Relief, however, can apply after only two years of ownership, offering more efficient planning options. Upcoming Changes to Business Relief (Effective April 2026) In the Autumn 2024 Budget, the UK government introduced new legislation that significantly impacts the scope and application of Business Relief. These changes are set to take effect from 6 April 2026 and could dramatically alter the way entrepreneurs approach IHT planning. New £1 Million Cap on 100% Relief Currently, there is no limit on how much can qualify for 100% relief. However, starting in April 2026, only the first £1 million of business assets will qualify for full exemption. Any value exceeding that amount will be eligible for just 50% relief . This means large estates will see a significant rise in taxable value. Example: If a business is valued at £5 million: First £1 million: 100% relief (£0 taxable) Next £4 million: 50% relief (£2 million taxable) Potential IHT: 40% of £2 million = £800,000 AIM Shares to Receive Reduced Relief Previously, shares listed on the Alternative Investment Market (AIM) qualified for 100% BR. Under the new rules, AIM shares will qualify for only 50% relief , and this amount will not count toward the £1 million exemption . No Spouse Transfer of BR Allowance Unlike the nil-rate band for IHT, the new £1 million Business Relief cap cannot be transferred between spouses . Each individual has a personal limit, which could mean that couples miss out on significant tax savings. Trusts Will Be Impacted Currently, BR-qualifying assets held in trusts are exempt from the 10-year periodic charge. From April 2026, trusts holding assets over £1 million will be subject to this charge on the excess, adding another layer of complexity to estate planning. The Risks of Not Planning Ahead Many entrepreneurs operate under the assumption that Business Relief will cover the full value of their enterprise. Post-April 2026, this assumption could lead to: Unexpected tax bills for heirs Forced sale of business assets Disruption in succession plans How Entrepreneurs Can Prepare Now 1. Review Your Estate and Succession Plan Work with an estate planner or financial adviser to review wills, trust structures, and ownership models. Ensure your assets are aligned with your IHT objectives. 2. Take Advantage of Current Rules The window between now and April 2026 allows entrepreneurs to: Restructure ownership Make lifetime transfers Move assets into trust while still qualifying for current relief rates 3. Diversify Assets Strategically If your business exceeds the £1 million threshold, consider: Spreading ownership across family members Investing in BR-qualifying assets outside the business Buying life insurance to cover expected IHT 4. Consider Business Asset Disposal Relief (BADR) BADR, formerly Entrepreneurs’ Relief, provides a 10% Capital Gains Tax (CGT) rate on qualifying disposals of business assets. From April 2026, this will increase to 18%, but remains a tool worth considering alongside BR. 5. Educate Your Heirs Ensure that the next generation understands the structure of your estate and the implications of the new IHT rules. Proactive involvement can prevent future disputes and mismanagement. The Role of Business Relief in Legacy Planning Business Relief isn't just a tax break. It's a vital tool in legacy planning, allowing entrepreneurs to: Keep businesses in the family Retain employee continuity Maintain brand equity Preserve wealth across generations As the rules tighten, the role of strategic planning becomes even more important. How Sure Wealth Can Help At Sure Wealth , we specialise in strategic estate planning for business owners and entrepreneurs. Our services include: Estate and succession planning Business structuring for IHT efficiency Trust and lifetime transfer advice Investment guidance for BR-qualifying portfolios Life insurance solutions for IHT mitigation We take a proactive approach to ensure your wealth is protected and your legacy secured. Final Thoughts The upcoming changes to Business Relief will reshape inheritance tax planning for entrepreneurs in the UK. The days of full exemptions on unlimited business assets are ending. With a £1 million cap, reduced relief for AIM shares, and restrictions on trusts and spousal transfers, the need for timely and professional advice is greater than ever. Don't let your life's work be compromised by unplanned tax liabilities. Take the necessary steps now to prepare for 2026 and beyond. Speak to SureWealth Today If you're a business owner concerned about the impact of these changes on your estate, we're here to help. Call us on 0203 551 1090 or visit our contact page . Protect your business. Secure your legacy. Plan with confidence.
Running your own business is more than just a source of income — it’s a legacy. But what happens to that legacy when you’re no longer around? For many entrepreneurs and company directors in the UK, the idea of death is far from the daily agenda. Yet failing to prepare for it could jeopardise everything you’ve built. From Inheritance Tax (IHT) pitfalls to succession mishaps, one oversight could mean financial disaster for your heirs or the collapse of your business. This blog explores what happens to your business when you die, how IHT impacts business assets, the role of Business Relief, and what smart succession planning can do to protect your family and legacy. Why Succession Planning Can’t Wait The reality for UK entrepreneurs According to multiple legal reports, more than half of UK adults still don’t have a valid will — and among business owners, many still haven’t named a successor or addressed ownership transitions. This lack of planning can result in confusion, costly delays, and even asset loss if your estate is forced to sell business interests just to pay tax bills. Your death could mean: The business is forced to cease trading during probate. Staff are left without direction or leadership. Family members must sell business assets under pressure. The value of your life’s work is lost to tax or poor planning. For family-run companies, the emotional impact of losing a loved one is only magnified by the financial stress that often follows. Succession planning is not just a legal formality — it’s essential protection. Understanding Inheritance Tax (IHT) on Business Assets The 40% question Inheritance Tax in the UK is charged at 40% on estates valued above the nil-rate band of £325,000. If you leave your estate to your spouse or civil partner, there’s usually no IHT to pay right away. But once it passes on to children or others, IHT can hit hard. What’s more, business assets are included in your estate’s value unless they qualify for specific reliefs — and that’s where Business Relief (formerly Business Property Relief) comes into play. Changes are coming in 2026 and 2027 Currently, qualifying business assets may receive 100% relief from IHT. However, changes announced in 2024 mean: From April 2026, full 100% relief will be capped at £1 million. Any business assets over this will receive only 50% relief. From April 2027, pensions — including commercial property held in SIPPs or SSAS — will become subject to IHT. Heirs could be forced to sell those assets within six months to cover tax obligations. These changes make pre-emptive planning more urgent than ever. What Qualifies for Business Relief? To qualify for 100% or 50% relief under the current Business Relief rules: You must have owned the business asset for at least two years . The business must be trading , not simply holding investments or passive income-generating assets. The asset must still be held at the time of death. Relief rates: 100% relief applies to: Shares in a qualifying unlisted trading company. Sole trader or partnership business assets used in the business. 50% relief applies to: Shares in a listed company where the deceased had control. Land or buildings used by a business owned by the deceased. It’s crucial to regularly review the structure and trading status of your business to ensure you maintain qualification. What Happens to Different Business Structures? Sole Traders Your business is inseparable from your personal estate. When you die, business assets form part of your estate and are subject to IHT. Without instructions in a will, assets will be distributed under intestacy rules, which may not align with your intentions. If Business Relief does not apply, the tax burden could be significant. Partnerships If there’s a partnership agreement, it may specify what happens to your share. In many cases, a buyout clause allows the remaining partners to purchase your interest, often using life insurance policies. Without an agreement, your share becomes part of your estate and may be passed to family or beneficiaries, which could be complicated and disruptive. Limited Companies Shares in a private limited company can be inherited by named beneficiaries. However, the business may have a shareholder agreement or Articles of Association dictating how shares can be transferred. Some restrict ownership to existing shareholders or provide buyout mechanisms. Succession must be planned — and documented — to avoid ownership falling into unintended hands. The Financial Impact of Death Without Planning Let’s consider an example: Jane , a 62-year-old founder of a successful construction company, passes away unexpectedly. Her business is valued at £3.5 million and held in a limited company. She has two children, neither of whom work in the business. Without a will, her estate passes under intestacy. Business shares are now frozen in probate. Her children are forced to sell the company to cover IHT. They lose most of the proceeds to a rushed sale and tax. This outcome could have been avoided with a: Will specifying share transfer or sale terms. Shareholder agreement giving business partners buyout rights. Life insurance to fund tax liability. Trust to protect and manage the business interest. Pensions and Commercial Property: The 2027 Trap Many business owners hold commercial property — like warehouses or offices — inside their pension scheme. Until now, these pension assets were typically IHT-free. From April 2027, this changes. Pension assets, including properties and uncrystallised pensions, will become fully taxable under IHT upon death. That means: Your estate could owe 40% tax on property that can’t be easily liquidated. Your heirs may have just six months to raise the money — or sell. This poses a huge risk to continuity and capital preservation. A pre-2027 review is vital if your pension is holding valuable business assets. How to Build a Business Succession Plan A good succession plan does more than name a successor — it secures the business, preserves value, and limits tax. Here’s what to include: 1. Create or update your will Clearly specify: Who inherits the business Whether they receive shares or proceeds Any special provisions (e.g. voting rights, employment clauses) Without a will, intestacy law governs distribution — and business assets can go to the wrong people. 2. Draft a shareholder or partnership agreement These legal agreements dictate what happens on death or exit. They can: Offer buy-sell clauses Set valuation methods Ensure business control remains with desired individuals 3. Use trusts A discretionary trust can hold business assets for the benefit of children or dependants while protecting them from immediate IHT or loss of control. 4. Take out insurance Life insurance, held in trust, provides tax-free funds to: Cover IHT liabilities Fund a buyout Provide liquidity for business transition Key-person insurance can also help the business recover from the loss of a crucial figure. 5. Start succession discussions early Whether your successor is a child, manager, or external buyer, start training and planning years in advance. Sudden handovers often fail. What You Should Do Before April 2026 With the IHT reform approaching, business owners need to act fast. Here’s a timeline of what to consider: Task Deadline Why It Matters Review ownership and structure ASAP Ensure it qualifies for 100% relief Gift business assets Before April 2026 Avoid new £1m cap and aggregation Reassess pension holdings Before April 2027 Pension assets will soon be taxable Update wills and agreements ASAP Prevent unwanted legal outcomes Set up trusts or insurance ASAP Build liquidity and control succession Common Pitfalls to Avoid Many business owners assume: “My family will automatically inherit and run the business.” “The company will just carry on without me.” “IHT won’t apply because it’s a trading business.” These assumptions can be dangerous. Here are common mistakes to avoid: No valid will = no control over what happens. Business held via passive investment company = no relief. Ownership held less than 2 years = not eligible. Leaving shares to a non-spouse triggers IHT and transfer restrictions. How Sure Wealth Can Help At Sure Wealth , we specialise in supporting UK entrepreneurs and business owners with long-term wealth planning. Our expert advisers provide clear, actionable strategies to: Protect your family and business from heavy tax Navigate complex IHT reliefs and succession law Prepare for the April 2026 and 2027 changes Design tax-efficient ownership and transfer structures Ensure your business continues according to your wishes Whether you're a sole trader, company director, or property investor holding business assets in a pension, we can help you stay one step ahead. Call us today at 0203 5511090 or visit our contact page to schedule a free consultation. Final Thoughts Your business represents your vision, effort, and achievements. But without a proper plan in place, it could unravel quickly when you're no longer here. The combination of heavy inheritance tax, frozen shares, and unclear succession paths puts even successful enterprises at risk. With proactive planning — including a clear will, tax-optimised ownership, strategic gifting, and a knowledgeable adviser — you can ensure your business continues to thrive and provide for those you leave behind. Don’t let your life’s work become a tax burden or legal nightmare. Take control of your legacy today — and let Sure Wealth help you safeguard it for the future.
