Earlier this week, I was reading the draft of our latest Accelerator magazine ahead of it going to design…and hitting all good newsagents in early March.
And one of the articles made me think two things:
- I should share that in my weekly email as it’s really important
- It’ll save me thinking of a topic for my weekly email!!
So, with an article that brings me double happiness, here’s Louise’s take on the changes to Inheritance Tax from April.
You may have seen the farmers protesting over changes and thought “that’s nothing to do with me”…but the same principles are hitting business owners too.
Over to Louise….
Most of the owner-managed businesses we work with are in that sweet spot. Turnover in the high six figures or into seven figures. A good team. Healthy profits (or at least the potential for them). And usually a long-term view of building something that can one day support the family.
Which is why this change matters.
From 6 April 2026, the rules around Inheritance Tax (IHT) relief for businesses are tightening. Not for everyone, but for the businesses that are worth a decent amount, it is one of those “worth knowing now” changes.
The relief that is changing
When someone dies, IHT is normally charged at 40% on the value of their estate above the available allowances.
For years, many trading business owners have relied on Business Property Relief (BPR). In simple terms, if your company qualifies (usually because it is a genuine trading business), BPR can reduce the value that is subject to IHT. Historically, that relief has often been 100%.
What is happening in April 2026?
From 6 April 2026, there is a new £2.5 million cap on 100% relief for assets that qualify for 100% BPR (and it also links with Agricultural Property Relief, for those affected).
Above that £2.5 million, the relief drops to 50% on the excess.
That does not mean you pay 40% on everything above £2.5m. But it does mean you could pay IHT on part of the value, and that is where the bill comes from.
A simple example:
- Business value on death: £4,000,000
- 100% relief applies to: £2,500,000
- Excess: £1,500,000
- Relief on the excess: 50%
- Taxable amount: £750,000
- IHT at 40%: £300,000
That £300,000 has to come from somewhere. Usually that means dividends, borrowing, selling assets, or in some cases selling the business.
Yes, paying by instalments can help cash flow, but it is still a liability that needs planning for.
What should you do now?
If your business might be worth £2.5m plus (now, or in the next few years), here are the sensible steps:
- Get a rough valuation. Not a 40-page report, just a realistic estimate.
- Check the business actually qualifies for BPR. Trading versus investment can make a big difference.
- Review ownership and succession. Who owns the shares today, and who is meant to own them in future?
- Think about funding. If there could be an IHT bill, how would it be paid without damaging the business?
If you want a quick sense-check, please get in touch and we will tell you what we would need to do an initial review.
If you have any questions, please email su*****@*********************co.uk or give us a ring on 0151 380 8084.
Many thanks
Jon