Inheritance Tax for Businesses in the UK
- Culverhouse & Co
- Jun 8
- 2 min read
As of April 6, 2026, UK inheritance tax rules will limit 100% Business Relief to £2.5 million of qualifying business assets per person. Any value above this - and some assets like AIM shares - may face an effective 20% tax. Currently, full relief often applies, allowing business assets to pass on free of inheritance tax after two years.
Having said that, your exposure often sits in:
Property
Savings and investments
Pensions (from 2027)
Your personal assets could be what creates the tax risk.
Before considering any planning strategies, it’s important to know what you’re entitled to. Speaking to a Chartered financial professional like ourselves can help you understand your options clearly and make informed decisions.
Key Factors: Inheritance Tax Planning for Businesses
Business Relief (BR): Covers unincorporated businesses, shares in unquoted trading companies, and certain land/machinery, usually requiring ownership for at least two years
Excluded Assets: Assets not used for business (e.g., investment portfolios or cash not required for future use) typically do not qualify for relief
2026 Changes: From 6 April 2026, new rules will restrict BPR, meaning some family businesses may face a 20% effective tax rate.
Who Pays: Inheritance Tax is generally paid by the estate's executors, not the business itself
Why Planning Matters
Just as you need a business plan to build and grow a company, you also need a clear strategy for passing it on.
For many owners, their business is a major part of family wealth, and there’s a strong desire to protect it for future generations. That’s why early planning is essential - especially if you want to transfer ownership or control to family members.
Succession planning across family businesses is inconsistent. While many owners understand the potential inheritance tax impact, a significant number have no formal estate plan in place. At the same time, many in the next generation are unclear about what will happen when ownership is passed on.
Common areas that often cause issues include:
Missing key details in tax or estate planning
Failing to consider current laws and regulations
Not having a clear 5–10 year plan for retirement or exit (sale, closure, or succession)
Automatically passing the business to a spouse without full consideration
Balancing fairness between children
Changes to inheritance tax and pension rules, along with the complexity of succession, make forward planning more important than ever.
Next Steps: We're Here to Help
When it comes to inheritance tax for businesses in the UK, taking a proactive approach can help ensure a smoother transition for both your business and your wealth.
Now is the time to review where you stand with Inheritance Tax.
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