Over the past year, UK entrepreneurs have faced rising pressures, from higher employment costs through National Insurance increases to uncertainty around the forthcoming Workers’ Rights Bill. Now, Business Property Relief (BPR), which has long allowed trading businesses to pass to the next generation with little or no tax, will be capped from April 2026 – a change that could leave entrepreneurs facing significant new liabilities.
What do the forthcoming UK inheritance tax changes relating BPR mean for entrepreneurs, family-owned businesses, and their long-term succession plans? How should business owners rethink estate planning, gifting strategies, and potential exits in light of the new rules? And what practical steps can families take today to protect wealth and ensure a smooth leadership transition?
These questions were central to a recent evening hosted by Lombard Odier in the UK, bringing together entrepreneurs and a panel of experts in tax, trusts, succession planning, and private equity chaired by David Barker, Senior Wealth Planner at Lombard Odier.
Being an entrepreneur can sometimes feel like a lonely journey, which is why Lombard Odier is committed to working hand in hand with business owners – guiding and supporting not just at the point of a sale, but throughout every stage of growth, succession, and wealth transfer.
Mark Goddard, UK Chief Executive Officer at Lombard Odier, opened the evening by highlighting the firm’s long-term perspective: “We understand both the opportunities and the responsibilities that come with building and passing on a legacy. Our aim tonight is not just to outline what lies ahead, but to explore the strategies entrepreneurs and families can put in place between now and April 2026 to navigate these changes and make the most of the opportunities that remain.”
BPR changes explained: inheritance tax implications for business owners
BPR has long been a cornerstone of estate planning. Shares in a privately owned trading business – or other qualifying assets – could historically pass to heirs with 100% relief, making planning straightforward.
As Michelle Denny-West, Partner at Moore Kingston Smith and an expert in tax and succession planning, explained, this certainty is shifting. From 6 April 2026, the relief will be capped at GBP 1 million per individual, with any value above that receiving only 50% relief. For example, a business worth GBP 5 million would face an Inheritance Tax (IHT) bill of GBP 800,000 under the new rules – a stark contrast to the previous zero tax liability.
BPR is not disappearing, but its scope will be narrower
The transitional period is also important. Gifts made before 30 October 2024 remain fully exempt. For gifts made between that date and 5 April 2026, the current rules continue to apply – provided the donor survives seven years. From 6 April 2026, the new cap and 50% relief on excess take effect for all gifts. They will also apply retrospectively to gifts made in the transitional window if the donor dies within seven years. It is now crucial that estate and succession planning considers the revised framework.
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learn more BPR is not disappearing, but its scope will be narrower. Business owners need to reconsider inheritance planning and lifetime gifting strategies. Those who act early may still secure relief; those who delay could face unexpected liabilities.
The impact of inheritance tax changes on entrepreneurs
The new BPR rules introduce a previously unimaginable tax liability, prompting a rethink of estate and business planning. Ben Lister, Partner at the law firm Taylor Wessing, noted that succession planning has moved up the agenda. Timing and structure are critical – owners must decide when and how to transfer the business, and to whom. Some involve gradual lifetime planning; others require more immediate action.
Timing and structure are critical – owners must decide when and how to transfer the business, and to whom
Trusts can help manage IHT while allowing owners to retain influence. As Michelle Denny-West observed, until 5 April 2026, qualifying business assets can still be placed into trust without triggering the usual 20% entry charge, although the reduced level of relief would apply to 10-year charges. From 6 April 2026, relief will be capped at GBP 1 million per individual, with any excess qualifying for only 50% relief. This change would give rise to entry charges, as well as ongoing 10-year charges.
The reduction in relief is prompting some to reconsider exit strategies. Partial or full sales may now be more attractive than holding assets purely for legacy purposes, allowing owners to crystallise value while managing tax exposure.
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learn more Planning business exits under new inheritance tax rules
Marcus Archer, Managing Partner at Clearwater and an expert in mergers and acquisitions (M&As), noted that the new BPR rules are prompting many entrepreneurs to reconsider long-term intentions. Some who had planned to pass the “family silver” to the next generation are questioning if that remains efficient. While reforms have not sparked a surge of sales, they have pushed liquidity planning higher up the agenda.
Private equity funds are particularly well placed. With substantial undeployed capital – so-called “dry powder” – they are offering increasingly flexible deal structures. Selling to private equity no longer means handing over the entire business: options now include minority stakes that provide partial liquidity, growth capital to support expansion, or succession support through buy-and-build strategies. Strategic buyers remain an alternative, though selling to competitors can raise its own challenges around commercial sensitivities.
“Plan early,” advised Marcus. “Two years out is the right time to start thinking about it if it is to be an option.” Early preparation allows owners to define their objectives clearly – growth capital, minority stake sale, management buyout, or strategic trade buyer.
Read also: What’s your number? Valuing your business and defining your exit strategy
Succession is equally central. “Private equity funds in particular will want to look the CEO in the eye and say: we’re in this together for the next five years,” Marcus explained. A motivated and incentivised leadership team can be decisive in inspiring investor confidence.
Finally, preparation extends to housekeeping. Governance, systems, and controls must withstand scrutiny. Buyers now expect monthly trading data, KPIs, and credible forecasts, all feeding into a robust three-year business plan. The more thorough the preparation, the smoother – and more valuable – the eventual transaction.
Next-gen leadership and business succession under BPR changes
One of the first questions is whether the next generation genuinely wants to take on leadership. As Marcus Archer noted, capability and motivation cannot be assumed. Families need to assess interest, identify skills gaps, and consider whether external hires might be needed – though cultural fit is critical when bringing in non-family executives.
Ultimately, succession planning must combine clarity on who will lead with practical solutions for how ownership is passed, balancing family objectives with tax efficiency
If the next generation is ready, structural tools can support the transition. Ben Lister explained that outright gifts of shares to adult children can be effective, provided the owner survives seven years and steps back from benefit. Life insurance held in trust can help provide liquidity to cover IHT, while cash reserves may allow a company to repurchase shares from an estate. Reviewing wills and shareholders’ agreements is also essential, as provisions drafted under the old relief rules may no longer hold.
Ultimately, succession planning must combine clarity on who will lead with practical solutions for how ownership is passed, balancing family objectives with tax efficiency.
Once leadership and ownership questions are addressed, a further consideration emerges: residency. For a growing number of entrepreneurs, the discussion is less about which family member takes the reins, and more about whether remaining in the UK is still the right long-term choice.
Residency and inheritance tax: planning for the UK and abroad
Entrepreneurs are increasingly exploring life outside the UK. As Michelle Denny-West observed, “Over the past five years, I’ve had countless conversations with clients saying, ‘I’m going offshore so I don’t have to pay capital gains tax when I sell my business.’ And quite often, it’s a head-in-hands moment.”
The reality is far more complex. Since April 2025, the UK has moved to a residence-based inheritance tax system. Long-term residents – broadly, anyone resident for more than 10 out of the last 20 years – will be liable on worldwide assets. This liability continues for between 3 and 10 years even after leaving the UK (the so-called ‘IHT tail’) even if they later leave. And while capital gains tax relief may be possible, it requires being non-resident for more than five years (which, in practice, may mean six full tax years). As Michelle noted, “That’s a long time – and the Statutory Residence Test is far more nuanced than simply counting 183 days.”
In abolishing domicile as a factor in the UK tax rules, the government may have created an incentive to push wealth out of the UK
David Barker highlighted a further paradox: “All you have to do, even if you have been UK resident all your life, is be non-resident for 10 years, and you’re no longer subject to UK inheritance tax on your non-UK assets. In abolishing domicile as a factor in the UK tax rules, the government may have created an incentive to push wealth out of the UK.”
Choosing a new jurisdiction adds another layer of complexity. Double taxation agreements may mitigate risks, but local rules can still bite.
Read also: Should I stay or should I go? From Non-Dom to FIG in a new UK tax era – a practical guide
Succession, tax, and exit planning: next steps for business owners
The forthcoming BPR and inheritance tax changes will significantly affect business owners and families. While the legislation may shift slightly before enactment, the broad rules are expected to take effect from 6 April 2026.
As Ben Lister highlighted, it comes down to short-, medium-, and long-term goals: should you accelerate succession planning, make gifts, or consider a business exit? These are delicate decisions – especially when only some family members are involved in the business – and they can have a major impact on wealth distribution and family dynamics. Michelle Denny-West’s advice is clear: “Don’t bury your head in the sand. Understanding the impact allows you to take informed action – and even small steps can secure meaningful benefits.” Simple measures, like reviewing mirror wills or the new GBP 1 million BPR limit, can make a real difference without complex planning.
For those exploring a sale, Marcus Archer recommends early, discreet conversations: define your objectives, evaluate options, and prepare the business and stakeholders carefully. As he notes, “Don’t be afraid of private equity – it can provide multiple routes to achieving family wealth over time.”
At Lombard Odier, we work closely with clients to navigate these complex changes. Our teams of private bankers, wealth planners, and investment specialists provide tailored guidance, helping families and business owners take timely, informed decisions to preserve and grow wealth, while balancing tax, succession, and business objectives. The right planning now can protect your family, your business, and your legacy for years to come.
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