As a specialist Wills, Trust & Probate solicitor, I regularly see how unexpected tax changes can affect families — often years after plans were first put in place. One upcoming change in particular is something every business owner should be aware of.
From 6 April 2026, the rules governing Business Property Relief (BPR) will be significantly amended, and these changes could substantially increase the Inheritance Tax (IHT) due on business assets.
Many clients assume their business automatically qualifies for 100% relief. Unfortunately, from April 2026, that assumption may no longer be safe.
What Is the Current Position?
At the moment, qualifying business assets receive 100% Business Property Relief, meaning they can pass free of Inheritance Tax on death.
For many family businesses, this relief is essential in preserving the company for the next generation and, as the BBC recently reported, these sweeping changes have the potential to destroy family businesses.
What Will Change From April 2026?
The Government has announced several key reforms:
- A new £1 million cap for 100% BPR: This applies to the combined value of agricultural and business property.
- Anything above £1 million receives only 50% relief: This means the 20% IHT rate will apply to the excess — rather than the usual 40%.
- The allowance is not transferrable between spouses or civil partners: Each person must use their own £1 million allowance individually.
- AIM-listed shares will only receive 50% relief: Currently, most AIM shares attract 100% BPR.
These changes mean that for many businesses — particularly those holding significant cash, investments or surplus assets — inheritance tax exposure may rise sharply.
Case Study: A Family Business Caught Out by the Changes
Mason Engineering Ltd is a long-established family manufacturing company valued at around £2 million.
Founder Peter, now 78, remains the majority shareholder. His daughter Sophie works in the business and is expected to inherit the company.
The company currently holds:
- £600,000 in accumulated cash reserves
- A small portfolio of investment funds
- Shares in a joint venture that no longer trades
Peter always assumed the business would qualify for full BPR, meaning Sophie would inherit without an IHT bill. But under the April 2026 rules:
- Only the first £1 million of value may receive 100% relief
- The next £1 million may receive only 50% relief, exposing £1 million to 20% IHT
- Surplus cash and non-trading assets may be treated as excepted assets — losing BPR entirely
- The investments could compromise relief for the whole shareholding
If Peter died without restructuring, Sophie could face:
- A potential IHT bill of up to £200,000 on the reduced-relief portion
- A further charge of up to £240,000 on the excepted assets
- A risk that the business may need to sell assets to pay the tax — the very outcome BPR was designed to prevent
This is a scenario we are seeing more frequently as businesses diversify, accumulate cash, or hold investments for future plans that have not yet materialised.
What Should Business Owners Be Doing Now?
The 2026 changes introduce a number of risks — but with the right planning, many of these can be managed or mitigated. You may need to:
- Review how cash is held within the company
- Rebalance trading vs non-trading activities
- Restructure shareholdings
- Update Wills or existing Trust arrangements
- Make use of lifetime planning opportunities before April 2026
- Consider extraction strategies that align with succession plans
Every business is different, and the correct approach requires bespoke advice.
Our Advice: Don’t Wait, Act Now
April 2026 may feel distant, but in reality, meaningful restructuring takes time — and leaving things too late could result in unnecessary tax exposure for your family.
As specialists in Wills, Trusts, Business Succession and Inheritance Tax Planning, we can help you:
- Understand exactly how the new rules apply to your business
- Review your current Will and Trust structure
- Protect your estate from unexpected IHT charges
- Put a clear, legally secure plan in place
SH&Co. Wills, Trusts & Probate Specialism
If you own a business or hold business assets, now is the time to review your arrangements. Early advice can make a significant difference to the tax your estate might face.
📞 As Private Client specialist with over 30 years of experience and a full member of STEP (the Society Of Trust and Estate Practitioners), I’m here to help you protect your legacy, safeguard your family, and prepare confidently for April 2026 - contact me on 01606 48777 or TomRimmington@susanhowarthsolicitors
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