The UK Government in its 2024 Budget announced major changes to Business Property Relief (BPR) and Agricultural Property Relief (APR). Previously, qualifying assets such as unquoted business shares were eligible for 100% relief, allowing full intergenerational transfer free from Inheritance Tax (IHT).
From 6 April 2026, this relief will be limited to the first £1 million of combined BPR/APR eligible assets. Any excess above £1 million will receive only 50% relief, equivalent to an effective IHT rate of 20%.
Why the change matters
Consider a trading business with £3 million in shares at the owner’s death after April 2026. The first £1 million will qualify for 100% relief, meaning now IHT will be payable. The remaining £2 million qualifies for a 50% relief, leaving £1 million of an estate liable for IHT at 40% – a tax bill of £400,000.
Where ownership is concentrated in just individual and without intervention, family business assets face considerable tax exposure that will, in some instances, mean the end of what was once a viable business.
As a result, there has been a notable increase in intra-family share transfers following the 2024 Budget.
Timing transfers before 6 April 2026
The gift of the shares is classified as a Potentially Exempt Transfer (PET). If the PET is made between 30 October 2024 and 06 April 2026, it falls into what HMRC refers to as the “transitional period”. Therefore, if the client makes a PET during this period and passes away after 06 April 2026 but within seven years from the date of transfer, there is an allowance of £1 million instead of full relief. Any balance over £1 million will be subject to an effective IHT rate of 20%
Managing control and family dynamics
Gifting a majority stake of any shareholding can threaten control of the company. One solution is gifting shares into a trust where parents serve as trustees (but not beneficiaries), allowing them to steer business decisions while transferring value. Alternatively, retaining a minority stake post-gift can preserve blocking rights, though valuations of those shares are likely to be adjusted, with HMRC recognising reduced control diminishes share value, potentially increasing the effective amount transferred for PET purposes.
Exploring Family Investment Companies (FICs) and Employee Ownership Trusts
The IHT reforms are also accelerating interest in Family Investment Companies, which centralise assets within a structure where children hold shares and parents retain management influence. While FICs help in intergenerational planning, they involve considerable up front costs, ongoing compliance, and could trigger capital gains tax on growth.
Key considerations for family business owners
- Start planning now. Articulate long-term goals, whether full business succession or phased value transfer.
- Assess valuation impact. Minority stakes may benefit from valuation discounts, influencing PET outcomes.
- Structure relief strategically. Leverage trusts and gift outright. Consider future financial needs and business continuity.
- Account for external risks. Divorce or creditor claims on gifted shares may undermine intent.
- Update wills and succession plans. With ISAs, pensions and other allowances shifting, family members must review wills to optimise use of the £1 million BPR cap and prevent potential double-taxation.
Every business and family situation will be different and these are decisions that should not be taken lightly given the long term impact they are likely to have on the future of the business. It is essential that advise is taken from both your accountant and solicitors.
Speak to one of our advisors below for more information on this article.
