Succession planning for business owners

The Autumn Budget 2024 introduced significant reforms to Business Relief (BR), with effect from 6 April 2026. These reforms present a time-limited opportunity for business owners to undertake strategic estate and succession planning to mitigate future tax exposure.

This note outlines some of the key planning opportunities available.

Key planning opportunities before 6 April 2026

Gifting shares into trust

Gifts of qualifying business assets into discretionary trusts made before 6 April 2026 can still benefit from 100% BR, with no immediate IHT charge, even if the value exceeds the new £1 million cap.

As a trustee, you can retain control over the gifted shares, while protecting assets for future generations.

Gifting can reduce your estate’s value and attract IHT valuation discounts, especially when shareholdings are diluted, subject to the legislation, which is still under consultation.

Outright gifts to children

Each child can benefit from their own £1 million BR allowance after holding shares for two years. One option is to consider making gifts to family members to maximise the number of £1 million allowances.  

Outright gifts are straightforward but offer less control and asset protection than trusts.

Gifts are potentially exempt transfers (PETs) for IHT and may qualify for CGT holdover relief under s165 TCGA, subject to trading status.

Sale of shares to capture Business Asset Disposal Relief (BADR)

Selling shares before 6 April 2026 allows access to lower BADR rates (14% in 2025/26 and 18% thereafter).

Sales can be structured with deferred consideration or funded by gifted cash, depending on liquidity.

Establishing multiple trusts

Only trusts created before 30 October 2024 each benefit from a separate £1 million BR allowance.

However, multiple trusts set up after that date, although subject to the £1 million allowance, can (subject to the legislation) enhance valuation discounts and provide tailored asset protection for each beneficiary.

Non-statutory clearance applications

In some circumstances, HMRC clearance can confirm whether BR applies in full (especially where the company holds significant cash).

Clearance can also confirm whether the company meets the trading requirements for BADR or CGT holdover relief.

Clearance applications may be recommended for complex cases involving high-value gifts or sales.

Additional planning options

We would also recommend that articles of association and shareholders’ agreements are reviewed to protect against unintended share transfers (eg, on divorce).

Families may consider using a Family Investment Company (FIC) to hold shares, offering long-term control and potential IHT and CGT efficiencies.

The strategic use of term or whole-of-life policies (held in trust) to cover potential IHT liabilities can mitigate the risks involved in a planning strategy.

Business owners are advised to ensure wills and Lasting Powers of Attorney are up to date and aligned with estate planning goals.

Donors are advised to encourage children receiving significant gifts to enter into nuptial agreements to protect family wealth.

Timing

The window to take advantage of the planning options is narrow. From 6 April 2026, BR will be capped at £1 million per individual, with excess relief reduced to 50%. This will significantly increase IHT exposure for business owners with valuable shareholdings.

We strongly recommend reviewing your estate planning strategy now to take advantage of the current reliefs and exemptions.

Next steps

If you'd like to explore any of the planning opportunities outlined above, please contact a member of our private client team. We would be delighted to arrange a meeting to discuss your circumstances and tailor a strategy that aligns with your goals.

You can also watch a recording of our Future-proofing your business: Inheritance tax changes webinar here.