Peter Gouw
Partner, Valuation Services
Updated on: 12 June 2026
If you are starting to get to grips with the April 2026 changes to inheritance tax (IHT), it is vital to know what your business and other assets are worth and to review your IHT position.
The changes to Agricultural Property Relief (AR) and Business Relief (BR) will have significant impact on the IHT liabilities for business and farmland owners - this article focuses on how to manage the impact.
IHT liabilities can substantially increase for deaths after 6 April 2026 so careful planning is needed particularly in cases where the estate would have been relying on the previously available 100% BR and AR from IHT.
In the past, many business owners held onto shares in their trading company until death, passing them to the next generation without incurring IHT. There was also the added benefit of a capital gains tax (CGT) base cost uplift on death to market value. While the CGT uplift remains in place, the 20% IHT charge on assets over £2.5 million will, in most cases, mean that it is no longer attractive to hold qualifying assets until death.
The changes create succession planning challenges, particularly in owner-managed businesses. The key considerations now are how to pass on wealth to the next generations in a tax-efficient manner and how to fund any IHT liability that may arise. Starting the process earlier in life is a key tactic.
A first step is to consider your IHT exposure based on the new rules and revisit your current Will. This may require a valuation of your shares in the business.
Need to discuss the value of your business in more detail?
You may also want to consider the options explained below as part of your wider IHT planning strategy. As ever, tax planning is only one factor and should be assessed along with wider commercial considerations in any decision. Tax outcomes depend on individual circumstances, and legislation may change again in future.
Find out more about IHT business relief
A direct gift to the next generation is still a tax-efficient solution where there is a significant chance of the donor being alive seven years after the date of the gift. After seven years, the gift falls out of the donor’s IHT estate.
However, before gifting a business asset, you should check whether the conditions for claiming gift hold-over relief for CGT are met. The conditions to be met for ‘qualifying assets’ under BR from IHT are different to those required to be met under gift hold-over relief for CGT purposes.
If the donor does die in the seven year period, the value of the assets gifted at the time the gift was made could become taxable. Gifts given in the three years before death are taxed at 40%. Gifts given three to seven years before death are taxed on a sliding scale due to ‘taper relief’.
Shares can also be settled into a trust for the next generation as an alternative to a direct gift. It should be noted that settlements of shares made after 30 October 2024 (when the changes were announced) but before 6 April 2026 still went into trust initially without triggering an IHT charge. However, should the settlor die post 5 April 2026 and before seven years after making the settlement, IHT on the value over the new BR limits will be payable on death.
Trustees must pay a charge on every 10 year anniversary of the date when the trust was set up if the trust holds ‘relevant property’ such as money, shares, houses or land, with a value above the IHT threshold. So, planning how these charges will be financed is an important consideration.
Business owners should also reconsider the share capital and ownership structure of their business. For spouses, any of the £2.5m nil band unused at death will be transferred to the surviving spouse (it is not necessary for the deceased spouse to have owned qualifying assets). However, for lifetime gifts, the allowance for individuals will refresh every seven years on a rolling basis in the same way the IHT nil rate band already applies to lifetime charges. Therefore, gifts to spouses not holding shares should be considered. This could involve gifting existing shares or issuing a new class of shares to meet that threshold.
If you are considering a sale of your business rather than passing it on, there are many commercial and tax aspects to consider. The sale could make your estate less concentrated in one investment and improve liquidity. The proceeds from the sale can be invested in a diversified portfolio and will allow more options to be considered in terms of IHT planning afterwards. There are a number of different options for selling your business that you could consider.
A sale to an employee ownership trust (EOT) allows you to sell your company indirectly to your employees via a special form of UK trust. Subject to satisfying certain statutory conditions, you can sell a controlling interest in your company for a commercial market value and claim a 50% UK CGT exemption on the disposal proceeds. Also, no immediate IHT charge is expected in most cases, subject to conditions being met.
Alternatively, you may want to consider an AIM IPO as a strategic exit option for your business, subject to qualifying conditions and investment risk considerations. Most investments in companies traded on the Alternative Investment Market (“AIM”) qualify for BR. Under current UK tax rules any shares in these companies can be passed on free of IHT once you have held them for two years, albeit now the IHT relief is restricted to 50%.
Find out more about IPO readiness.
Our M&A team can help in reviewing strategic options for the sale and marketing of your business. Vendor due diligence (VDD) can be a good additional selling point in providing detailed information for potential buyers. Our Transaction Services team can help with the VDD.
If you are considering a business exit, speak to our Transaction Services and M&A teams.
Business owners that are planning to retire or move abroad may have a wider range of options but there are complex rules to consider since 6 April 2025 – particularly if owners are not domiciled in the UK.
Read more about UK residence here.
One of the main challenges in relation to the changes to the IHT reliefs is in relation to funding tax liabilities, a couple of options can be considered:
You should review your IHT position now. Understanding the valuation of your assets and your options is the first step in the process. Our Tax and Valuation teams are here to help you navigate these complexities and ensure your succession planning remains tax efficient.
