17 Jan 2025
By Lesley McKnight, Partner, Private Client, Gilson Gray
Crucial estate and succession planning to minimize tax liabilities before they take effect in April 2026
In the October 2024 Budget, significant reforms were announced in relation to Business Property Relief (BPR) that will impact business owners. On or after 6 April 2026, these changes will introduce a £1m cap on the value of qualifying business assets eligible for 100% relief from Inheritance Tax (IHT). Any surplus value over that will only qualify for relief at 50%, effectively subjecting business owners to a 20% IHT rate.
For example, a business valued at £5m, will now have an exposure of £800,000, and a business valued at £10m, will have an exposure of £1.8m.
This policy shift aims to increase tax revenues and address perceived inequities in the tax system. However, it has raised concerns among business owners, particularly those with substantial assets, who fear increased tax liabilities could hinder succession planning and business continuity.
Family-owned businesses have expressed apprehension about the potential financial burden when transferring ownership to the next generation
Business owners will be required to find funds to meet the tax liability. Engaging with legal and financial advisors is crucial to review estate and succession planning, and to develop plans that will minimise tax liabilities before they take effect in the next year.
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