Date posted: 23rd Apr 2026
By Jonathan Doyle, Accounts and Business Advisory Partner
Business owners are being urged to review their succession plans following significant changes to inheritance tax (IHT) that came into effect earlier this month, on 6 April 2026.
While much of the media attention has focused on the impact on the farming and agricultural sector, the changes apply far more widely and affect family-owned and owner-managed businesses across all industries.
For many, the implications are only now becoming clear as the new rules take effect, and we are seeing increasing numbers of business owners seeking clarity on how these changes will affect their long-term plans.
Under the legislation, Business Property Relief (BPR) and Agricultural Property Relief (APR) are now capped. From 6 April 2026, 100 per cent relief applies only to the first £2.5 million of qualifying business and agricultural assets per individual, with any remaining value eligible for relief at 50 per cent.
Historically, these reliefs have played a crucial role in allowing business assets to pass between generations without triggering an IHT liability. With the cap now in place, many business owners may face tax liabilities where previously none would have arisen.
The policy was first announced in the 2024 Budget, with subsequent revisions including an increase in the relief threshold from £1 million to £2.5 million, alongside provisions allowing the transfer of unused allowances between spouses.
However, despite these amendments, a substantial number of established family businesses are likely to exceed the threshold once the company is commercially valued and off-balance sheet items such as goodwill are considered.
A key challenge for many businesses is the imbalance between asset value and available liquidity. While a company may be valuable on paper, it may not generate sufficient cash flow to meet an IHT liability. In some cases, this could result in difficult decisions, including the potential sale of shares or business assets to meet tax obligations.
At Clive Owen LLP, we are increasingly seeing this as a concern among business owners who may not have previously needed to factor IHT into their long-term tax planning.
Planning options remain available, but they are rarely straightforward and will depend on individual circumstances. Gifting shares or business assets may be considered, although the seven-year rule means such transfers could still fall within the inheritance tax regime if the donor does not survive the required period.
Trust structures may also be explored as part of a longer-term strategy, although these can be complex and are not suitable for every business. Our tax team are working closely with clients to assess which approaches are both practical and appropriate.
With the changes now in force, timely professional advice is increasingly important. Reviewing ownership structures, succession plans and potential exposure to inheritance tax can help business owners take a more informed and proactive approach.
Early consideration may provide greater flexibility and help support the long-term continuity of family-owned businesses.
If you would like to discuss how these changes may affect you or your business, please do not hesitate to get in touch with a member of our specialist team.
