Why changes to Business Relief mean you should start succession planning now

In light of upcoming changes to Business Relief, it’s more important than ever to consider succession planning now.

For generations, Business Relief (BR) has enabled business owners to pass on their commercial interests free of inheritance tax (IHT). Designed to ensure that the success of UK businesses is not interrupted by a hefty tax-bill, Business Relief currently applies to any interest in a trading business that has been held for at least two years at the date of death and offers 100% IHT relief irrespective of value. However, changes to Business Relief are on the way.

What do the changes to Business Relief mean?

From April 2026, individuals will only be able to apply Business Relief to the first £1m of BR investments, which limits the potential tax saving (previously uncapped) to just £400,000 per person. Where BR assets exceed £1m, the additional value receives 50% IHT relief and so is effectively taxed at a reduced rate of 20%, instead of 40%.

This raises several questions for business owners and their advisors; not least, how can the new IHT bill be mitigated and/or funded without jeopardising the continuation of the business?

What can business owners do?

Consideration may need to be given to maximising the relief by sharing BR assets across the family during the owner’s lifetime to make use of multiple £1m thresholds. Of course, this presents the usual concerns of loss of control, upsets to company structure, family dynamics and so on.

What is certain is that the clock is ticking and now is the time to make the difficult decisions. It is more important than ever that business owners seek the advice and assistance of their advisors to protect the future of their business.

If you would like any further detail or tailored advice on the upcoming changes to Business Relief, please do get in touch with our wills, trusts & probate team.

Our Legal 500-rated wills, trusts & probate team has the expertise to help you plan for the future and guide you through any difficult challenges that may arise, including those relating to Business Relief.