Entrepreneurs – take note and action – a serious obstacle is in front of you

Adapting to digital transformation, globalisation and political and economic obstacles has become a way of life – we must meet every challenge head-on. With any change, sensible advice becomes a strategic asset. Entrepreneurs need partners who understand urgency, offer clarity and are familiar with uncertainty.

The Government’s announcements to amend the rules around Business Property Relief (BPR) represent a once-in-a-generation change. They necessitate a fundamental shift in our approach to Inheritance Tax (IHT) planning, which has been in place in the UK for over four decades.

Since its introduction in 1976, BPR has played a critical role in protecting businesses from a potentially burdensome tax bill upon the death of an owner. The primary purpose of legislation, which itself has changed in recent years to broaden the categories and scope of assets that should qualify for relief, was to protect and promote the continuity of family-owned businesses, recognising their importance to the UK economy.

From 6 April 2026, the rules surrounding BPR will change, and there is a clear call to action to consider the implications and any actions that may follow. The changes are:

• the BPR allowance will be capped at £1 million and will apply for 100% relief, refreshed every seven years
• assets above £1m will be eligible for 50% relief
• 100% relief will cease on AIM-listed shares, to be replaced by 50% relief
• unused allowances on death will not be transferable to spouses
• tax can be spread for payment over 10 years, interest-free

There are options, but the choices are not one-size-fits-all

First, it is essential to understand what is changing (needless to say, the subject is complicated) to consider the various parties who need to be involved in making decisions (the Company Board, shareholders and business advisors all have a responsibility to act) and to set a plan. Effective banking can remove friction from financial management. The Company can focus on critical opportunities — not on navigating red tape. The plan is unlikely to involve a straightforward document. With the potential of a sizeable tax liability, the finance department of every business will need to present cash flow and financial planning to its board. A refreshed personal financial plan for every shareholder with a potential liability should back it up.

As Head of Entrepreneurs at Weatherbys Private Bank, I have a responsibility to apply serious thought to the implications and impact on people’s lives, the continuity of businesses and their capacity to create a suitable plan. The temptation in business is to carry on, to grow the business to levels that can pay any liabilities due, and to think that a future change in Government might have a change of heart. In my experience, the greatest failures and defeats often stem from a lack of clear thinking and poor planning.

With the changes still several months away, there is a window of opportunity to make plans and adjustments under the existing rules. To help along the way, I have set out below a six-point checklist of questions to ask yourself and the Board, along with six potential points for consideration.

Questions for a board

1. Does the board need education and the management team require training as to the implications during the owners’ lifetime for managing this potential tax liability?
2. Does your board have a documented and agreed-upon plan in the event of a shareholder’s death?
3. Has the exposure been quantified and modelled for tax consequences – to support a dividend payment or share buyback to the death estate?
4. Is the business resilient enough to enable shareholders to meet the IHT liability? If not, is there recourse to available finance
5. How would the board achieve equity in paying out to one shareholder and not to all minority interests upon death?
6. Is there a succession plan for major shareholders?

Planning questions to consider

1. Are you aware of the current structure of company holdings and how the reliefs apply? Are there any restrictions or opportunities?
2. Is there a need to consider the appropriate share classes for the future management of the business – appropriate to the ownership and voting controls of each shareholder?
3. Is this a time to consider transferring qualifying assets into a trust, accelerating succession planning, changing partnership sharing ratios and/or even time to sell?
4. Review current wills to ensure spousal exemption is correctly treated and to maximise allowances across the family?
5. Consider setting a target and building up reserves within the business to meet the tax liability (gross of dividend or income tax)?
6. Consider using insurance in personal name (written in trust) to mitigate the liability or to support a gifting strategy over time – funded from the Company as keyperson cover

At Weatherbys Private Bank, we work with a range of our clients’ advisers to educate and support plans for both business and personal affairs. Get in touch if you need help or would like a second opinion on a plan that suits your own circumstances. As an entrepreneur, you are used to facing tough challenges and the change to BPR is another obstacle you may have to overcome. We are here to help. We can provide you with the support and advice you may need during this time of significant change – a generational change at that!

What you need to know

Tax laws are subject to change and taxation will vary depending on individual circumstances