How the New Inheritance Tax Rules Could Reshape UK Family Businesses in 2026

From April 2026, the UK’s inheritance tax (IHT) regime will undergo a major shift that threatens to fundamentally change how family-owned businesses are passed down through generations. Under the current structure, most trading businesses qualify for 100% Business Property Relief (BPR), enabling shares or business assets to transfer to heirs without any IHT liability. This has long encouraged succession planning and family-led economic growth. However, new legislation means that only the first £1 million of qualifying business assets will be exempt from IHT. Anything above that threshold will now attract an effective 20% tax rate. For family firms that have spent decades building their legacy, the financial consequences of this reform are potentially devastating. At Apex Accountants, we work closely with multi-generational businesses to prepare for these new inheritance tax rules and secure their future.

Below, we explain what’s changing, what it means for your company, and what actions you should consider now.

What Is Changing in April 2026?

Currently, family-run trading businesses benefit from 100% BPR. This applies to both unquoted shares and interest in a partnership, allowing the entire value of the business to be passed on tax-free on death.

From 6 April 2026, that changes. The new regime will:

• Allow only the first £1 million of qualifying trading business assets to be passed on tax-free.
  
• Apply a flat 20% tax on any value above that threshold.
  
• Remove full IHT relief for most medium and large-sized businesses.
  
• Affect not just agricultural or land-based businesses but any trading company, including manufacturers, service firms, e-commerce brands, and more.
  

Example:

If your trading company is valued at £5 million, the new rules would exempt the first £1 million from tax. The remaining £4 million would attract a 20% tax bill—totalling £800,000 in inheritance tax due upon succession.

The Impact of New Inheritance Tax Rules on Businesses

Business owners are already expressing frustration and concern about these changes. Some say the move undermines long-term investment and threatens the very survival of family firms.

Entrepreneurs say they may shift investment overseas to countries with more supportive tax policies. Others are re-evaluating whether it’s still worth building long-term businesses in the UK if success leads to penalising tax bills at death.

Many family firms operate with relatively low cash reserves. While their asset value may be high (e.g. machinery, stock, land, IP), these assets are not easily liquidated. If heirs are forced to raise hundreds of thousands in tax upon inheriting the business, they may need to:

• Sell off part of the company
  
• Cut jobs
  
• Take on expensive loans
  
• Abandon expansion plans
  

This leads to loss of continuity, weakened business performance, and regional economic decline, particularly in areas where family businesses are the primary employers.

Who Will Be Affected by the Inheritance Tax Reforms?

The new inheritance tax reforms apply to all UK-based trading businesses, whether incorporated or not. You are likely to be affected if:

• You own a business valued over £1 million.
  
• You plan to pass the business on to your children, spouse, or relatives.
  
• You have built a succession plan assuming full BPR relief.
  
• You have not yet prepared liquidity reserves for future IHT liabilities.
  

Sectors that could be heavily impacted include:

• Agriculture and Farming
• Retail and E-Commerce
• Manufacturing and Engineering
• Hospitality and Food Services
• Logistics and Transportation
• Construction and Property Services
• Technology and Creative Firms

Why This Matters

The government has justified the changes by stating that only a small number of wealthy estates benefit from the current relief:

• 53% of BPR (£533 million) goes to just 158 estates each year.
  
• The change could raise £520 million annually for public services.
  

While these numbers appear significant, many tax experts argue that the broader economic cost outweighs the gain. Firms may defer succession planning, reduce investment, or exit the UK entirely—resulting in lower future tax receipts, job losses, and declining regional growth.

What Should Business Owners Do Now?

To protect your business and your legacy, we strongly advise early preparation. Apex Accountants is already supporting clients with tailored IHT mitigation strategies.

Here’s what you should consider:

1. Get a Formal Business Valuation

Understanding your business’s real market value is the first step. This will help determine whether you’ll be exposed to the £1m threshold.

2. Review or Draft a Will Immediately

Ensure your will reflects current ownership and includes tax planning clauses. If you don’t have one, you risk default HMRC treatment.

3. Explore Employee Ownership Models

Selling to an Employee Ownership Trust (EOT) can reduce tax exposure while preserving company culture. Capital gains tax is also avoided.

4. Set Up Family Trusts

Discretionary trusts and family investment companies can reduce future liabilities, though these structures must be planned carefully.

5. Start Building Cash Reserves

Prepare your successors by ensuring they have funds available to meet any future IHT bill without having to sell parts of the business.

6. Seek Professional Tax Advice

You’ll need accountants and solicitors with experience in inheritance tax, trusts, and corporate structuring to protect your business.

How Apex Accountants Support Family Businesses

At Apex Accountants, we’ve helped hundreds of UK family-run businesses plan for succession, mitigate tax exposure, and retain generational ownership. We provide:

• Inheritance Tax Forecasting and Planning

Accurately project future IHT liabilities under the new rules and build a IHT mitigation strategies roadmap.

• Business Valuation and Asset Segmentation

Full company valuation, including goodwill, fixed assets, property, and IP rights.

• Succession Planning Strategies

Support for gradual handover of shares, staggered gifting, and exit planning.

• Legal Coordination for Wills & Trusts

Liaising with legal teams to structure trusts, ownership vehicles, and family wealth transfers.

• Employee Ownership Trust Advisory

Guidance on establishing EOTs to maintain business continuity and tax efficiency.

• Liquidity and Exit Planning

Help build capital reserves, plan disposals, or raise funds for tax obligations.

Whether your business is worth £2 million or £20 million, our priority is to protect your legacy and ensure you don’t pay more tax than necessary.

Frequently Asked Questions on New Inheritance Tax Reforms

What is Business Property Relief (BPR)?

BPR allows qualifying trading business assets to be passed on free of inheritance tax. From April 2026, only the first £1 million will qualify.

Will these changes apply to all businesses?

Yes, the new rules apply to all UK trading businesses—agricultural or non-agricultural—if their value exceeds £1 million.

How much inheritance tax will my family pay after April 2026?

Your family will pay 20% on the portion of business value above £1 million. A £4 million business would generate a £600,000 tax bill.

Can I transfer shares to my children now to avoid tax?

Early planning may help reduce future IHT, but gifting shares comes with capital gains tax (CGT) implications. Professional advice is essential.

What if I don’t do anything?

Your estate may face a large, unexpected tax bill. Your family may be forced to sell assets, take out loans, or dismantle parts of the business.

Are there ways to avoid or reduce the tax legally?

Yes. Tools include trusts, EOTs, family investment companies, and lifetime gifting—but these must be structured well in advance.

Will farms and rural businesses still get relief?

Only up to £1 million in total value. Beyond that, they too will face the 20% charge, regardless of land size or history.

What happens if my business is partly trading and partly investment?

Mixed-use businesses may not qualify fully for BPR. The investment portion (e.g. rental properties) could be fully taxable.

Is employee ownership a good idea?

For some firms, yes. It avoids CGT at the point of sale and transfers ownership gradually, keeping jobs and culture intact.

When should I start succession planning?

Immediately. The earlier you act, the more tools are available. Don’t wait until April 2026—it may be too late.