For more than 30 years, many qualifying business assets have benefited from 100% Inheritance Tax (IHT) relief, often keeping family businesses effectively outside the IHT net. From 6 April 2026, that long-standing position will change dramatically. For entrepreneurs holding high-value, illiquid business interests, the question is no longer “Is there an IHT bill?” but “How will it be funded, and what should we do before the deadline?”
What is changing – and when?
From 6 April 2026, relief on qualifying business and agricultural assets is being reduced from 100% to 50% on the portion of value above a limited 100% threshold of GBP 2,500,000. Relief has historically been 100% for more than three decades, with no value cap, which in practice has often meant an exemption from IHT for eligible business and agricultural assets. Although farms have been highly visible in the public debate, this article focusses on business assets. The government originally proposed a GBP 1,000,000 relief threshold, which it defended until a late pre‑Christmas U‑turn increased it to GBP 2,500,000.
If you have not already modelled your potential exposure under the new regime, we recommend this should be your first move
One of the business assets most exposed to this change is shares in unlisted trading companies, a point of particular relevance for many entrepreneurs. For owners whose businesses have historically been largely sheltered from IHT, 6 April 2026 marks a fundamental shift. IHT is charged at 40% and, from that date, it may apply to 50% of the value of qualifying business assets above the GBP 2,500,000 threshold (subject to other available exemptions, including inter-spousal transfers). The result is that many entrepreneurs must now confront difficult, time-sensitive decisions about succession, liquidity, and long-term family planning.
If you have not already modelled your potential exposure under the new regime, we recommend this should be your first move.
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learn more How did we get here?
The 100% relief for business assets was introduced on 10 March 1992, aligned with then British Prime Minister John Major’s vision of allowing wealth to cascade down the generations. A core objective was to ensure tax policy did not distort decisions about when, and how to transfer family businesses. In recent years, the relief has drawn attention from various think-tanks across the political spectrum. Supporters argue it helps business continuity, local employment, and long-term investment, while critics have highlighted the fact that the relief disproportionately benefits a relatively small group of individuals.
The government has embraced the latter view. In its first Budget on 30 October 2024, the government’s explanatory press release stated:
The government has decided to retain these reliefs but better target them, as it is not fair or sustainable for a very small number of claimants each year to claim such a significant amount of relief1.
The announcement came without prior consultation and was widely seen as a shock to the business community and to professional advisers. The one immediate positive was the deferred start date – 6 April 2026 – creating a 17-month window to lobby for change.
Progress since then has been limited:
- a narrow consultation on the details of how the new rules will affect trusts
- in the Budget on 23 November 2025, the government announced the GBP 1,000,000 100% relief threshold would be ‘transferable’ between spouses, so that if one spouse dies without using their threshold, the unused amount will be available to the surviving spouse
- on 23 December 2025, the government increased the 100% relief threshold to GBP 2,500,000 (instead of GBP 1,000,000), stating:
The government is going further to protect more farms and businesses, while maintaining the core principle that the most valuable agricultural and business assets should not receive unlimited relief2.
The message is clear: the government’s core principle is that value above GBP 2,500,000 should not receive unlimited relief. For owners of high-value businesses, the threshold increase offers some protection, but the principal exposure may still sit well above that level.
Don’t assume the GBP 2,500,000 threshold makes this “someone else’s problem.” For many business owners, it simply defines where the real IHT exposure begins.
What should business owners consider now?
Many entrepreneurs affected by these changes are weighing four fundamental responses, each with clear trade-offs.
1) Accept the IHT liability – but plan ahead to fund it?
The central challenge is liquidity. Unlisted shares are often hard to release quickly, yet IHT arises on the death of the owner (or shareholder). While it may be possible to pay IHT in 10 equal annual instalments, this does not remove the funding issue – it only spreads it.
Some entrepreneurs have implemented a life insurance solution with the policy written in trust, so proceeds may be available to meet IHT. Others have decided to build cash reserves within the business, or put in place corporate “key man” insurance or similar arrangements, so that the company can fund a buy-back of shares from the estate of a deceased shareholder.
2) Accelerate succession planning to move the business outside the estate
Some business owners are considering lifetime transfers to move value outside the estate to reduce IHT exposure. A lifetime gift to an individual may be a Potentially Exempt Transfer (PET) – meaning no IHT if the donor survives seven years. But gifts of shares can also trigger capital gains tax (CGT) considerations – often at market value – although holdover relief may be available in certain situations for family trading companies.
This combination can make lifetime succession a powerful tool – but the commercial risk is obvious: tax pressure can drive succession before the business is truly ready, potentially jeopardising performance, leadership stability, or family alignment.
If a trust could play a role, treat this as a time-critical project as the essential pre-implementation legal and tax advice can take longer than most families expect
3) Use a trust – but the clock is ticking
Trusts can be useful when:
- the next generation is not yet ready to take the reins, but
- the owner wants structure, oversight and a phased transition.
Unlike a gift to an individual, a transfer to a trust is generally a lifetime chargeable transfer (not a PET, except in rare situations). The planning opportunity here is that trust planning should be undertaken before 6 April 2026, while business assets settled into trust may still qualify for 100% relief. In practice, that means the implementation needs to be completed by 5 April 2026. If a trust could play a role, treat this as a time-critical project as the essential pre-implementation legal and tax advice can take longer than most families expect.
4) Consider a sale?
For some families, the conclusion is uncomfortable but rational: a large IHT exposure combined with illiquid shares creates a family risk that feels unacceptable. As a result, many owners are:
- Moving towards a business sale
- Reviewing how to mitigate CGT and IHT in both the short and long term.
Even if you don’t want to sell, it may be prudent to consider a contingency plan, because families who plan options tend to avoid forced decisions later.
Read also: Ready to sell? How to maximise the value of your business – practical advice from our UK CEO
The looming deadline: what to do now
With 6 April 2026 approaching fast, affected business owners should ensure they have done the following:
- modelled the potential IHT impact under the new regime (including inter-spousal and other exemptions)
- reviewed wills to ensure they still deliver the intended outcomes – and amended them where needed
- assessed whether trust-based planning is appropriate, and if so, ensured it is implemented by 5 April 2026
- built and stress-tested the funding plan for any IHT exposure (insurance, reserves, buy-back mechanics, instalments)
- revisited the business succession plan, governance and leadership readiness
- evaluated liquidity options (even if only as a contingency).
These decisions are complex, personal, and fact specific. The cost of delay is that choices narrow, and in some cases, outcomes become reactive. If you own a high-value business, particularly an illiquid, unlisted trading company, now is the time to act.
Speak to your Lombard Odier banker to discuss what these reforms could mean for you, your family, your business, and the steps you may want to take before April 2026.
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