Written by Liz Elliott, Director at McEwan Wallace
From 6 April 2026, the rules around Business Property Relief (BPR) have changed. For many owner-managed businesses, this could mean a future Inheritance Tax (IHT) bill where previously there may have been little or no IHT to pay on qualifying business assets.
Not every business owner will face an additional tax liability. However, the changes make it important to understand your position, review your succession plans and make sure the business itself is not left carrying an unexpected tax burden later.
At McEwan Wallace, we work alongside owner-managed businesses every day. Our message is simple: do not leave this until there is a problem. A short planning review now could protect your family, your business and the value you have worked hard to build.
What's changing?
Business Property Relief has historically been one of the most valuable IHT reliefs available to business owners. In many cases, qualifying shares in a trading company could benefit from 100% relief, meaning the business value was effectively outside the IHT charge on death.
From 6 April 2026, the position changes.
For deaths on or after that date:
- 100% relief will be capped at £2.5 million of qualifying business and/or agricultural property
- Any qualifying value above that allowance will generally receive 50% relief
- This means the excess value may suffer an effective IHT charge of up to 20% on death
- Any unused allowance may be transferable between spouses or civil partners, potentially allowing up to £5 million of qualifying assets to pass with 100% relief between them
The detail matters. The £2.5 million allowance is not simply a separate allowance for every asset. It applies to qualifying business and agricultural property, so business owners with company shares, farming interests, land, partnership interests or trusts will need advice on how the allowance applies in their circumstances.
Why this matters for owner-managed businesses
For many business owners, most of their wealth is tied up in the company. That can create a practical problem.
An IHT liability may arise on death, but the estate may not have enough cash to pay it. The value is in the business, not sitting in a bank account.
That can put pressure on the family and the company at exactly the wrong time. The estate may need to consider dividends, borrowing, a sale of shares or even a sale of the business to fund the tax. None of those options are ideal if they are being dealt with under pressure, during a bereavement and without a clear plan.
This is why BPR planning is not just a private family tax issue. It is also a business continuity issue.
A simple example
Take an owner-managed trading company worth £10 million, owned by one shareholder, with the shares qualifying for Business Property Relief.
Under the previous rules, those shares may have qualified for 100% relief, meaning no IHT on the business value.
From 6 April 2026, the broad position may be:
- First £2.5 million: 100% relief
- Remaining £7.5 million: 50% relief
- Taxable amount: £3.75 million
- IHT at 40%: £1.5 million
That is a significant liability, and it may need to be funded without selling the business. Where a spouse or civil partner's allowance is available, the IHT position may be improved, but this should be checked as part of the estate and succession planning.
What should business owners do now?
- Understand the value of the business
The first step is to understand what the business may be worth. Many owner-managers underestimate the value of their company, especially where profits have grown, property is held in the company, or there is strong goodwill.
A valuation does not need to be a sale exercise. It can simply help you understand whether the new rules may affect you and how large the exposure could be.
- Check whether the business qualifies for relief
BPR is not automatic. Businesses that mainly hold investments, surplus cash, property or other non-trading assets may not qualify in full, or in some cases may not qualify at all.
Even where a company is clearly trading, the balance sheet should be reviewed. Surplus cash, investment assets, property arrangements and group structures can all affect the relief available.
This housekeeping matters more than ever. Even 50% relief is valuable, so losing relief because of poor structuring or lack of review could be expensive.
- Review Wills and shareholder arrangements
A Will written several years ago may no longer achieve the result intended.
For example, it may leave shares directly to children when a transfer to a spouse or civil partner could defer the IHT position. It may not make best use of available allowances. It may also create practical issues where some children work in the business and others do not.
Owner-managed businesses should also review shareholder agreements:
- What happens if a shareholder dies?
- Can the company or surviving shareholders buy the shares?
- How would that be funded?
- Would insurance help?
- Are the valuation provisions still appropriate?
These questions are much easier to deal with before there is a death or dispute.
- Think about succession early
Succession does not always mean handing the business to the next generation. It may mean:
- Gifting shares during lifetime
- Bringing family members into ownership gradually
- A management buy-out
- Selling to an employee ownership trust
- A sale to a third party
- A structured plan for the current owner to step back over time
The right answer depends on the business, the family, cashflow, control and the owner's personal financial needs.
Lifetime gifts can be useful, but they need careful advice. There are tax rules, valuation issues, control considerations and commercial risks. However, the earlier you start, the more options you are likely to have.
- Plan how any tax would be funded
Even with good planning, some IHT may still arise. The key is to avoid surprises.
Funding options might include insurance written in trust, planned dividends, borrowing, staged share transfers, company purchase arrangements or other succession planning. Each has tax and commercial consequences.
The important point is that the plan should protect the business, not drain it.
Do not assume this only affects very large businesses
The headline numbers may make the changes sound like an issue only for very large companies. In practice, many successful owner-managed businesses can exceed the threshold sooner than expected.
A company does not need to have millions of pounds in cash to be worth several million pounds. Strong profits, valuable contracts, property, goodwill and growth potential can all increase value.
That is why we recommend a review, even if you think you are below the threshold today. Business values change, family circumstances change and tax rules change.
How McEwan Wallace can help
By understanding the full picture — you, your business, your aims and your goals — we can support you with strategies designed to help you achieve them.
We can help you:
- Estimate the potential IHT exposure on your business
- Review whether your company is likely to qualify for BPR
- Identify risks in the company structure or balance sheet
- Work alongside your solicitor on Will and succession planning
- Consider funding options, including insurance and shareholder arrangements
- Build a practical plan that supports both your family and the business
These changes are not something to panic about, but they are something to plan for.
If you own a trading business, hold shares in a family company, or are thinking about succession, now is the time to take advice. Doing nothing may be the most expensive option.