Time for business owners to start their estate planning

There has been a lot of press coverage of how the changes to Business Relief (BR/BPR) and Agricultural Relief (AR/APR) will affect farmers, and for good reason.  However, the changes will have a significant impact on all business owners and now is the time to start seeking estate planning advice.

In summary, currently individuals owning business assets are eligible for inheritance tax relief of either 50% or 100% on those assets if certain criteria are met. In particular, 100% relief applies to shares in private trading companies.

This has generally meant that many business owners have not really needed to carry out any inheritance tax planning, as 100% relief from inheritance tax has been available on their business assets when they died.  Unfortunately, this is no longer the case.

From April 2026, there will be a £2.5 million cap on assets eligible for 100% relief.  This will be a combined cap covering both AR and BR and will be apportioned across the qualifying assets pro rata. It will be possible to transfer any unused 100% relief to a surviving spouse*. Qualifying assets over the £2.5 million allowance will receive 50% relief.

Draft legislation has been published which provides a more detailed view of how the changes will be applied.  Although amendments may be made to the draft legislation before it becomes law, it is important for those affected to start taking specialist advice on their options to minimise the impact of the reduction in these reliefs.  This includes individuals who already have some planning in place, as the severity of the reduction in reliefs may mean their current arrangements no longer meet their objectives.

In particular, individuals should consider the following:

• Gifts into trust before 6 April 2026 as (subject to certain anti-tax avoidance rules) this allows the business assets being transferred into trust to benefit from unrestricted 100% relief if the individual survives the gift by seven years, whereas transfers into trust after that date will only benefit from 100% relief up to the £2.5 million limit and 50% thereafter
• Even though any unused proportion of the £2.5 million allowance will be transferable to a surviving spouse, ensuring any business assets which qualify for 100% BR are owned tax efficiently between spouses
• Making outright gifts to family members to start the clock on the seven years which need to pass before the gift is outside of the individual’s estate
• Reviewing wills to ensure they can deal with the changes in the most tax efficient way possible.

The above is a very broad overview and specific advice for your particular circumstances should be taken. If you have any questions or would like to arrange a meeting to discuss the options available, please get in touch.

*All references to spouse include civil partners.