Inheritance Tax Changes 2026: Six Steps Business Owners Should Take Now
New inheritance tax limits come into force in April 2026. Here’s six key steps business owners should consider now to protect business relief and reduce IHT exposure.
Business owners face an important inheritance tax (IHT) deadline in April 2026. New limits on business and agricultural property relief will reduce the amount that can be passed on free of inheritance tax — and without careful planning, this could result in significant tax bills for families and businesses alike.
Those considering succession planning, gifting shares or selling their business may still have time to act, but the window is closing.
What is changing for inheritance tax in April 2026?
From 6 April 2026, a new £2.5 million cap will apply to assets qualifying for:
- 100% Business Property Relief (BPR)
- 100% Agricultural Property Relief (APR)
Any value above this cap will receive only 50% relief, potentially resulting in an effective 20% inheritance tax charge on the excess.
Unused allowance can now be transferred between spouses or civil partners, meaning couples may be able to pass on up to £5 million of qualifying assets free of IHT on the second death. Even so, many business owners will remain exposed without proactive planning.
Why business owners should act now
The April deadline creates a clear point of no return for certain planning strategies – particularly where trusts or business transfers are involved.
A large and unexpected inheritance tax bill, especially where cash is limited, can place serious strain on a business and, in some cases, threaten its survival.
Six steps to consider before April 2026
- Confirm which assets qualify for business relief
Not all assets within a business will qualify for BPR. Excess cash, investment activities and mixed-use group structures can dilute or disqualify relief.
A detailed review of the company’s structure and balance sheet — ideally with professional advice — is an essential first step.
- Review gifting and trust planning before the deadline
Before April 2026, it is still possible to transfer unlimited business-relief-qualifying shares into a discretionary trust with no immediate inheritance tax charge.
From April 2026, only the first £2.5 million per individual will qualify for full relief. Any excess transferred into trust may trigger an immediate IHT liability.
Trust planning can be highly effective, but it must be affordable and aligned with your wider financial position. Legal drafting, valuations and approvals all take time, so early action is key.
- Complete ownership and structural changes early
Many planning strategies require business reorganisations before shares can be gifted or sold. These can include:
- Creating new share classes
- Establishing holding companies
- Reorganising group structures
These processes often take longer than expected, and poor sequencing can accidentally invalidate business relief. Completing changes well ahead of the deadline reduces risk.
- Start life insurance underwriting early
When a business is sold, BPR protection is lost as shares convert to cash. If the owner dies before proceeds are reinvested or structured correctly, the estate may face a substantial inheritance tax bill.
Life insurance written in trust can help manage this risk, but underwriting can take months. Starting early improves the chances of cover being in place when it’s needed.
- Align business planning with personal estate planning
Business transactions should not be planned in isolation. Changes to ownership, voting rights or company structure may affect:
- Wills
- Existing trusts
- Succession intentions
- Eligibility for business relief
Ensuring business and personal planning are aligned helps preserve reliefs and avoids costly mistakes.
- Plan ahead for post-sale cash
Following a business sale, holding large amounts of cash creates an immediate inheritance tax exposure. A clear plan should address:
- Where liquidity will be held initially
- Whether a family investment company is appropriate
- How proceeds will be managed until a long-term strategy is in place
Forward planning reduces stress and improves tax efficiency after completion.
Speak to Kellands Corporate
Inheritance tax planning for business owners is complex — and the cost of getting it wrong can be significant. With the April 2026 deadline approaching, now is the time to review your position.
Kellands Corporate works closely with business owners to align succession planning, tax efficiency and long-term financial security. If you’re considering selling your business, gifting shares or restructuring ahead of the inheritance tax changes, our specialists can help you understand your options and take action with confidence.
Contact Kellands Corporate today to discuss your business and inheritance tax planning.