From April 2026, the inheritance tax (IHT) landscape is changing – and family business owners could be among the hardest hit.

A major reform is the introduction of a £1 million cap on Business Property Relief (BPR). This means only the first £1 million of qualifying business assets will receive 100% relief. Anything above that will qualify for just 50% relief – creating a potential 20% IHT charge on death.

For family-run businesses, especially those that are asset-rich, this presents significant planning challenges. Tax partner, Roger Phillips, explains what you need to know – and how to prepare.

What’s changing?

Currently, BPR offers up to 100% relief on qualifying business assets – such as shares in private companies – enabling them to be passed on without triggering inheritance tax where various conditions are met.

From April 2026, the rules will change:

• 100% relief will apply only to the first £1 million of qualifying business assets.
• Any value above that will receive 50% relief, and IHT will then apply at 40%, resulting in an effective 20% IHT charge.
• The £1 million cap is per individual and, unlike other allowances, will not be transferable between spouses.
• Trusts are subject to their own tax regime, and pay tax every 10 years based on the value of the assets that they hold. These trusts will benefit from their own £1m cap, although the same person won’t be able to set up multiple trusts to access more £1m allowances.
• It is still possible for families to plan their succession in a tax efficient way, and there are some more options to plan before 6 April 2026 than there will be after that date.

The impact of inheritance tax changes on family businesses

Many family-owned businesses already exceed the £1 million threshold – especially when property, cash reserves, and retained profits are considered.

Without early action, some estates could face significant IHT bills. Even if you’re not planning to exit or retire soon, succession planning should be at the forefront of peoples’ minds.

What can you do now?

Here are five key planning actions to consider:

1. Review your ownership structure

If the business is owned by one or two individuals, consider whether shares can be passed to family members or placed in trust. This may allow families to make use of multiple £1 million BPR allowances – but professional advice is essential as transferring assets can lead to unexpected tax charges.

2. Explore lifetime gifts

Gifting shares during your lifetime may still attract BPR. However, new anti-avoidance rules complicate the timing and treatment of such gifts. Early action could reduce your IHT exposure, speak to a tax specialist to understand your options.

3. Trusts: act before it’s too late

If you are considering transferring assets into trust, there may be a greater opportunity to place more value in trust before 6 April 2026 than there will after that date.

4. Clean up your balance sheet

Although the amount of relief that BPR gives is being reduced, it’s still a valuable relief and worth having. The amount of relief can be tainted by having surplus cash, investment properties, and other non-trading assets within a business. A balance sheet review can help ensure your business qualifies for the maximum available relief.

5. Plan for cash flow and liquidity

If your estate is likely to be subject to IHT, your beneficiaries may need liquid assets to cover the tax bill – potentially forcing a sale at an inconvenient time.

Plan ahead with:

• Life insurance written in trust to cover any liability

• Shareholder agreements to facilitate share transfers or buybacks
• Gifting strategies supported by formal valuations

Next steps

There’s still time to act – but the window is closing.

With rising business valuations and tighter relief limits, more families than ever are at risk of a significant IHT bill. If your business assets are likely to exceed £1 million, we strongly recommend reviewing your estate and succession plans.

Now is the time to:

• Engage expert advice
• Secure the right structures and protections
• Futureproof your business for the next generation

For tailored advice, contact Roger Phillips using the button below.