We write as a team who help business owners protect what matters most. The Autumn Budget announced changes that will affect many family businesses from April 2026.
100% Business Property Relief and Agricultural Property Relief will be limited to the first £1 million of qualifying assets. Above that, an effective 20% charge can apply and a cashflow bill may follow a death.
That means doing nothing is no longer a safe default. We will explain, in plain English, how the reforms alter the old assumption that trading company shares usually passed tax-free.
This is about more than numbers. It is about protecting jobs, keeping control, and avoiding a forced sale at a difficult time.
Over the article we will set out a clear buyer’s guide: what to review, what to ask advisers, which documents to check, and practical tools such as lifetime gifting, wills, trusts and spouse planning.
Key Takeaways
- Autumn Budget reforms take effect from April 2026 and limit full relief to the first £1 million of qualifying assets.
- An effective 20% charge may apply above that threshold, creating possible cashflow issues.
- Doing nothing carries real risk; early review reduces pressure on heirs and the business.
- Options include lifetime gifts, wills, trusts, spouse approaches and funding measures.
- Professional advice matters: timing rules and anti‑avoidance provisions can affect outcomes.
Why inheritance tax is now a business-critical risk for family businesses
Recent budget changes have turned a once-safe assumption into a serious risk for owners. From April 2026 only the first £1 million of qualifying business assets will get full relief. Above that, an effective 20% charge may hit estates.
Doing nothing is no longer an option. Many trading company shares and groups with non-trading holdings will find values pushed beyond the cap. Property-rich operations are especially exposed when land or buildings sit on the balance sheet.
That makes time an asset. Some measures need years to take effect. Leaving matters until after death can force rushed sales, dividend calls or heavy borrowing that harm staff and creditors.
“A large IHT bill arriving at a difficult time can fracture a business and a family.”
| Risk area | Why it matters | Quick check |
|---|---|---|
| Trading shares | Value above £1m may lose full relief | Estimate total share value |
| Property-rich firms | High property values push totals over cap | Review balance sheet property value |
| Group holdings | Non-trading assets can reduce relief | Map asset mix and shareholder structure |
Run a quick risk checklist: share value, asset mix, shareholder setup, age and likely future ownership. If you want a practical guide to next steps, see our short note on business succession options. Later sections explain relief routes, wills and funding strategies.
succession planning for family business and inheritance tax uk: what the new rules mean in practice
The headline changes have real cash consequences for estates and trading groups.
The £1 million cap. The first £1 million of qualifying assets keeps 100% Business Property Relief or Agricultural Property Relief. Above that, qualifying value only gets 50% relief. That produces an effective 20% IHT charge on the excess (50% taxable × 40% rate).
The £1 million limit on full relief
Example: if shares have a value of £1.5m, £1m is sheltered but £500k is only half-relieved. The taxable element can create a bill that families must fund quickly.
How an effective 20% charge hits cashflow
- Headline 40% becomes about 20% on the portion over the cap.
- That can force dividend calls, loans or a sale at a fragile time.
Anti‑forestalling and timing risks
Gifts made on or after 30 October 2024 may still be linked to death if the donor dies on or after 6 April 2026 within seven years. A failed potentially exempt transfer can receive only 50% relief.
Practical next steps. Gather latest accounts, share structure, asset schedule, any prior gifts and a rough value estimate. Early, calm action buys options. For further detail see our note on the £1 million.
Business Property Relief and Agricultural Property Relief essentials
We explain how the reliefs work so owners can act before a charge bites. BPR and APR reduce the value of qualifying business or farm assets when calculating estate liability.
What these reliefs are built to achieve
Simple aim: keep trading firms and farms intact by cutting the taxable value of qualifying assets.
They help owners preserve jobs and continuity by avoiding forced sales at a difficult time.
100% vs 50% relief — why valuation matters
Historically some assets got 100% relief, others 50%. After reform, the first £1 million of qualifying value may still get full relief, while excess can be only half‑relieved.
That split makes how value is evidenced crucial. Where value sits — shares, goodwill, land, surplus cash — changes the final outcome.
- Check the mix: goodwill, property, investments, and cash all count differently.
- Ask: what assets are used in trading activity and what looks like non‑trading or excess?
- Documents to check: shareholder agreements, articles, asset registers, land deeds and prior valuations.
Reliefs remain useful, but they must be actively evidenced. If you want practical routes to protect value, see our note on business inheritance relief options.
Buyer’s options to reduce inheritance tax on business assets before death
Many clients find clarity once they map options that move value without losing control. We set out practical steps you can take now to reduce exposure and protect jobs.
Lifetime gifting and the seven-year rule
Potentially exempt transfers (PETs) can remove value from an estate if the donor survives seven years. Gifting earlier increases certainty.
Note the anti‑forestalling rules: gifts made on or after 30 October 2024 may still be affected if death falls on or after 6 April 2026 within seven years.
Avoiding Gift with Reservation of Benefit pitfalls
Do not keep using an asset as if nothing changed. That can bring value back into the estate under GWROB rules.
“Gifting without changing benefit is one of the common mistakes that invalidates relief.”
Gifting shares and using a spouse
Transferring shares to the next generation can work, but check capability, governance and fairness between siblings.
Using a spouse or civil partner can increase relief headroom, but family law exposure can follow. Holistic advice is essential.
Treat this as a series of steps: review, model outcomes, decide and document. For a practical note on dealing with a large bill, see inheritance tax on a family business.
Trusts, wills and estate plans: structuring the handover without losing allowances
Placing qualifying shares into a trust can be a deliberate way to secure relief ahead of April 2026. A trust is a legal wrapper that lets you control who benefits and when.
When a chargeable lifetime transfer makes sense. Transfers into a trust attract a 20% lifetime charge. That can still beat a bigger, sudden bill on death, especially where value sits above the £1m band.
Decennial charges in plain terms. Relevant property trusts face a 10‑year charge at about 6%. Under the reform, the excess over the cap may only draw half that charge — effectively near 3% — often lower than the estate route.
Settling qualifying assets before April 2026 can “bank” full relief, though GWROB must be checked. Also, leaving everything to a spouse on first death can lose the new allowance. Consider a will trust to hold relief for the next generation.
For a practical note on timing and options to bank the relief see bank the relief.
Funding the tax bill and protecting the business after a death
Liquidity is often the hidden risk when ownership transfers on death. Even if heirs want to keep the company and its shares, an IHT bill must be paid in cash.
Life insurance written in trust creates a clean pot of money outside the estate. That cash can meet the bill quickly and keep trading going without forcing a sale.
Insurance is simple in idea but depends on age and health. Early review usually buys better cover at lower cost. We encourage owners to get quotes while they have time.
Company share buy-backs as a liquidity route
A buy-back lets the company buy shares from the estate to raise cash to pay heirs. This can protect active ownership and limit outside buyers.
Tax rules around buy-backs vary. We advise checking the tax treatment and shareholder agreements before any move.
When selling becomes the sensible option
Sale can be the right choice when there is no clear successor, deep family conflict, or capital locked in assets that cannot fund the bill.
- Signals to watch: disagreement between owners, lack of capable leadership, or an estate bill you cannot fund.
- Preparation to sell: tidy governance, clear asset records, up-to-date accounts and a simple ownership map.
“The best time to plan funding is when you have time — rushing after a death costs more.”
We can help you model options: insurance, a planned buy-back or a staged sale. The aim is to protect wealth, people and the going concern where possible.
Conclusion
A clear, calm review now gives owners far more control than crisis-driven choices later.
The April 2026 reforms create real exposure above the £1m cap and the anti-forestalling rules from 30 October 2024 add timing risk. Act early to protect value, people and the going concern.
There is no single best route. Options include lifetime gifts, trusts, wills, spouse steps, life cover or a company buy-back. Which fits depends on members, assets and goals.
Action list: quantify likely exposure, check ownership and documents, model sensible routes, then implement with coordinated legal, tax and governance advice.
If you want to sense‑check options with experienced advisers, talk to us on a no‑obligation basis or read our note on succession planning 2025.