We help owner-managers protect a large portion of their wealth when most value sits inside a business rather than in cash.
Private shareholdings can be illiquid. A 40% levy on your estate can arrive when value is tied up in the firm, not in a bank account. That risk changes the questions you must ask.
In this short guide we set out clear steps: what to act on now, what to review each year, and which choices are final. We compare allowances, lifetime measures, Business Property Relief (also called Business Relief), trusts, family investment structures and exit options.
We also flag upcoming rule changes from April 2026 that alter reliefs above set thresholds. Our aim is practical: gather the right documents, ask the right questions and show which moves are reversible and which are not.
Find a concise starter list and links to further reading, including our detailed guide on inheritance tax planning for company directors.
Key Takeaways
- Most value can be inside the business, not in cash — check liquidity.
- Some choices are one-way doors. Identify those early.
- Reliefs and thresholds will shift in April 2026 — plan for resilience.
- Gather straightforward documents before you meet an adviser.
- We focus on protecting your family while keeping the firm running.
Why inheritance tax matters for directors with company shares and business assets
A large paper valuation can hide a real cash shortfall when shares can’t be sold quickly.
That gap creates a practical pinch point. A 40% charge on an estate can force heirs to sell illiquid shares or business property at short notice.
HMRC values shares at open market value, not the nominal price on your cap table. That often raises the assessed value of shares and other business assets.
How a high rate can force a rushed sale
A firm may be profitable but tied up in stock, working capital or land. That leaves little spare cash to meet a large bill.
A hurried sale can cost control, attract unwanted investors or reduce the price your family receives.
What counts in your estate
Your estate typically includes personal assets and shareholdings valued at market rates. Property owned personally but used by the business can also increase the assessed value.
Who pays and when liabilities fall
Executors usually settle liabilities before distribution. But heirs may become liable if shares were gifted within seven years, if trust funds cannot pay, or if assets were released too early.
- Practical point: Treat this as business risk management, not only personal affairs.
- Focus: Protect reliefs, reduce taxable value and prevent rushed sales or disputes.
Read our detailed guide on inheritance tax on shares for practical next steps.
Using allowances and lifetime planning to reduce IHT exposure
Start with the allowances that can shield part of an estate before you consider other measures.
How the main bands combine
Nil Rate Band protects £325,000. The Residence Nil Rate Band adds £175,000 when a qualifying property passes to direct family. Together they can cover a substantial slice of value.
If both partners claim transferable allowances, a surviving spouse or civil partner may double the bands. That can lift the threshold to roughly £650,000, or to about £1 million when the residence band transfers and conditions are met.
Exemptions, gifts and the seven‑year clock
Gifts to a spouse or to charities are usually exempt. Lifetime gifts to others begin the seven‑year rule. If you survive seven years after a gift, it falls outside the estate.
Taper relief reduces the charge from year three onward. The key point: the clock only helps if you live long enough after making the gift.
Balancing control, governance and succession
Gifting shares can lower exposure, but it also affects ownership and control. That can change voting power, dividend rights and succession paths.
Practical approaches include staged transfers, documented shareholders’ agreements and aligning gifts with a clear succession timetable. Equal gifts to children sometimes cause friction; consider structures that keep options open while you guide succession.
| Allowance / Rule | Amount | Why it matters to owners |
|---|---|---|
| Nil Rate Band | £325,000 | Reduces taxable portion of an estate |
| Residence Nil Rate Band | £175,000 | Applies when the main home goes to direct family |
| Transferable allowances | Up to double | Surviving partner can use unused bands |
| Seven‑year rule & taper | Full relief after 7 years; taper from year 3 | Encourages early lifetime giving but requires survival |
Note: Allowances are only part of the solution for business owners. They sit alongside Business Relief and other measures that affect business assets. For a practical summary of rule changes and timings see new IHT rules and lifetime gifting.
Business Property Relief and Business Relief: qualifying rules, risks and common pitfalls
Business Relief can protect shares from a large estate charge—but only if strict conditions are met.
What usually qualifies
Unquoted trading shares often get up to 100% relief after two years of ownership. The test looks at activity, not label.
Trading versus investment
Many property or investment businesses fail the qualifying test. If the firm mainly holds land, securities or passive income, relief is limited or denied.
Excepted assets and surplus cash
Surplus cash or personal-use items held by the business can dilute relief. HMRC expects clear records showing cash is genuinely needed for trading.
Debt, contracts and associated assets
Secured borrowings against shares can reduce the effective relief. Likewise, a binding contract to sell at death can block relief; cross-options are a common workaround.
Claiming in practice
Executors must file IHT400 and schedule IHT413 with valuations, accounts and board minutes. Relief is not automatic — you must support the claim.
“Reliefs depend on evidence. Clean records and timely ownership are the most practical safeguards.”
For a practical guide to protecting business value see our detailed article.
Inheritance tax planning for company directors uk ahead of the April 2026 changes
April 2026 brings a clear cap that changes how much relief applies to large qualifying holdings.
In plain numbers: 100% business property relief covers the first £1,000,000 of qualifying value. Above that, relief falls to 50%. That split can create a real liability where shares exceed the cap.
Couples and split ownership
Because the £1m 100% cap is not transferable on death, couples sometimes split ownership. Two caps can protect more at 100% when both spouses hold voting shares.
Gifting and the seven years
Gifts made before the change still face the seven‑year rule. If death follows within seven years, the new limits may apply depending on timing and whether recipients keep the shares.
Don’t forget CGT
Gifts of shares are treated as disposals for capital gains tax. A staggered gifting approach can manage both gain and estate exposure.
| Action | Why it matters | Quick step |
|---|---|---|
| Model values to 2026 | Shows potential liability above £1m | Run scenarios with adviser |
| Consider split ownership | May secure two 100% caps | Check governance and control |
| Plan gifting timing | Affects seven‑year outcome and CGT | Stage gifts and document dates |
“Treat April 2026 as a hard deadline to test your plan and document choices.”
Next steps: review ownership, model liabilities and speak to an adviser about staggered gifting and CGT effects. We can help you turn this into a clear, written plan.
A buyer’s guide to choosing the right structures, documents and advisers
A clear checklist helps owners pick the legal tools that match family needs and business realities.
Will and legacy choices: don’t waste property relief through the wrong gifts
Leaving relievable shares to a spouse can sometimes “waste” property relief if that spouse later sells and holds cash.
We recommend specifying shares in the will rather than sweeping them into the residue. That keeps relief where it helps most.
Discretionary will trusts: flexibility and control
Discretionary trusts let trustees respond to changing circumstances. They preserve flexibility and can redirect assets within two years if relief looks shaky.
When business property relief still applies, the usual ten‑year trust charges may not bite the same way. That makes discretionary wills a strong option.
Lifetime trusts and family investment companies
Lifetime trusts remove future growth from your estate while you keep influence. They suit owners who want to retain voting power.
Family investment companies offer another route: transfer value but keep control via share classes and articles. They work well where succession and governance matter.
Exit, sale proceeds and early action
Sale proceeds often lose property relief once value becomes cash. Plan the exit early and cross‑check shareholder agreements to avoid binding sale contracts that block relief.
Documents and questions for your advisers
- Wills and trustee deeds
- Articles and shareholder agreements
- Recent valuations and trading evidence
Ask advisers how they will test qualifying status, deal with surplus cash, and implement steps so the plan works when it is needed.
“Small drafting choices decide whether relief survives. Get the documents and advisers aligned.”
Conclusion
, Smart steps now stop a forced sale later and keep control at home.
We summarise three simple pillars: use allowances carefully, protect Business Relief where it applies and choose structures that suit family succession. These steps aim to keep the business intact and reduce estate exposure.
Remember that much wealth can sit in shares and business assets. Liquidity matters as much as any calculation. If your holding could exceed the 100% relief cap from April 2026, model outcomes and check documents now.
Next steps: confirm what is in your estate, confirm which shares qualify for reliefs, review wills and shareholder documents, and agree an action plan with your adviser. With early work, families keep options and control without rushed decisions.