Karen Chadwick, private client tax partner at Hurst, warns family business owners to take urgent action before imminent overhaul of business property relief craters inheritance tax (IHT) advantages and threatens the future of generational family businesses
There remains ‘a window of opportunity’ to act and it is vital to start the process now as the clock ticks towards next April, when the reforms will come into effect.
Under current rules, family businesses and farms can be passed down to younger generations on death without an IHT charge, subject to conditions being met, under business property relief (BPR) and agricultural property relief (APR).
However, from April 2026, the full rate of relief will be limited to the first £1m. The balance will qualify for only 50% relief.
Shares worth £10m, for example, will receive £1m relief and 50% of the remaining £9m will be taxed at 40%, leading to a £1.8m hit.
The changes will mean thousands of generational family businesses will be exposed to inheritance tax for the first time in many years.
