Major Shake-Up for Business Owners: IHT Relief Slashed from April 2026. ACT NOW

Jon Davage

What’s Changing?

Big changes to Inheritance Tax (IHT) are on the horizon—and they could significantly affect owner-managed businesses.

While farmers have dominated headlines with protests over IHT reforms, business owners may be equally impacted, yet the changes have flown under the radar.

Currently, qualifying businesses benefit from 100% Business Property Relief (BPR)—allowing shares, in certain circumstances to be passed on tax-free or with a reduced IHT liability. But from 6 April 2026, that relief will be capped at £1 million. Beyond that?

• Only 50% relief applies.
• A 20% effective IHT charge on business shares above £1 million.

Example: What This Could Mean

Let’s break it down:

• Business Value: £3 million
• Before April 2026: Entire value covered by 100% BPR → £0 IHT
• After April 2026:
  • £1 million → 100% relief
  • £2 million → 50% relief
  • £1 million taxed at 40% → £400,000 IHT bill

Why It Matters

This is a major shift for business owners and their families. The ability to pass on a business worth over £1 million tax-free is ending.

Without proper planning, your estate may face a significant tax liability—potentially forcing the sale of the business to cover the cost.

 What Can Business Owners Do?

There’s still time to act. Here are some strategies to consider (with formal tax advice):

• Accelerate IHT planning: Make gifts or set up trusts before April 2026.
• Maximise the £1m relief: Spread ownership across family members.
• Life insurance: Consider a policy written in trust to cover future IHT.
• Corporate restructuring: Demergers, holding companies, Family Investment Companies (FICs), or trusts.
• Family buyouts: Lock in current reliefs through internal sales.

What We’re Seeing

Since the 2024 Autumn Budget, we’ve seen a surge in business owners revisiting their estate and succession plans. Many are accelerating succession timelines to secure reliefs before the changes take effect.

The Bottom Line

If you own a business, don’t sleep on these changes. The new IHT regime could cost your estate hundreds of thousands—unless you act now.

Review your company structure, estate plan, and tax strategy before April 2026.

Take Action Now: Protect Your Family Business before April 2026

The new IHT rules will fundamentally change how family businesses are passed on. To protect your business and family interests:

• Review your company’s legal structure to ensure it supports succession and asset protection under the new regime.
• Update shareholder agreements and trusts to reflect the upcoming changes and safeguard family control.
• Seek legal advice on restructuring options, ownership transfers, and governance to minimise risk and avoid forced sales.

Contact Bermans Corporate Team to discuss your options and ensure your family business is prepared for April 2026.