Trust planning considerations for business owners ahead of Business Relief inheritance tax changes
Business Relief IHT changes from April 2026 could raise tax bills. Learn how trusts and planning can protect your business legacy
Changes to inheritance tax reliefs from April 2026 could leave business owners with a substantially larger inheritance tax (IHT) bill than before. With less than a year now until these new changes are planned to come into force, strategic planning should be considered early.
Business owners have long been eligible for additional IHT reliefs on their business assets, to allow them to pass on their business interests efficiently. But following the 2024 Autumn Budget, this safety net is set to be significantly reduced.
Should legislation go ahead as announced, from 6 April 2026 the IHT exemption for Business Relief (BR) and Agricultural Property Relief (APR) will be capped at £1 million per individual, with any excess above this amount receiving just 50% relief. Spouses cannot transfer allowances, and the cap applies across all qualifying assets, including AIM shares and trust structures.
The message from government is clear: these reliefs are being curtailed. The impact for business owners with estates over the £1 million threshold is potentially severe, but planning opportunities remain.
Understanding the impact – case study example
To bring this to life, consider a business-owning couple with a combined estate of £25.88 million, including a trading business worth £20 million, personal pensions, and other assets.
| Asset Schedule | Mr | Mrs | Joint | Totals |
| Cash accounts | 250,000 | 250,000 | ||
| NS&I | 10,000 | 10,000 | ||
| Stocks & shares ISAs | 725,447 | 696,781 | 1,422,228 | |
| General investments | 143,728 | 143,728 | ||
| Pensions | 1,901,551 | 400,000 | 2,301,551 | |
| Qualifying trading business | 16,000,000 | 4,000,000 | 20,000,000 | |
| Main residence property | 1,200,000 | 1,200,000 | ||
| Holiday home | 500,000 | 500,000 | ||
| Cars, jewelry etc. | 50,000 | 50,000 | ||
| Total | 25,877,507 |
Under the current rules, the full value of the business qualifies for 100% BR. But from April 2026, that protection dramatically reduces. The table below summarises the potential IHT exposure if no action is taken:
Scenario | Date | IHT Liability |
Pre-change | May 2025 | £1.08m |
New rules apply | April 2026 | £4.68m |
One year later | April 2027 | £5.6m |
Business sold post-change | Post-April 2027 | £8.1m |
As this scenario shows, simply doing nothing could increase the estate’s IHT liability by over £7 million within two years. And if the business is sold (removing any remaining relief) the tax bill could soar even higher.
Please note that these figures are approximate and used as an illustrative example only.
Tax treatment is based on individual circumstances and is subject to change. This includes any proposed tax treatment, which may change when legislated on.
How gifting into trust could help some business owners
Business owners have time to act before the new rules take effect, but if the changes go ahead, the planning window is short. Even so, these are big decisions that should not be rushed, and it’s important to take appropriate advice.
Among the options available, a notable strategy worth considering for those prepared to act before the legislative changes are confirmed, is gifting BR-qualifying shares into trust before the 6 April 2026 deadline.
Under current rules, transfers of BR-qualifying shares into trust benefit from 100% relief and are not subject to immediate IHT. From 2026, only the first £1m of qualifying assets will be fully exempt, with 50% relief on any excess. Gifting into trust now can lock in today’s favourable treatment, with some additional benefits:
- Each individual can shelter £1 million tax-free, meaning a couple could move up to £2 million of BR assets into trust without triggering a charge
- After seven years, the value of the gift falls outside the estate entirely
- Trustees can manage the assets for future generations while retaining IHT protection, provided the assets remain BR-qualifying. It’s worth noting, however, that investing in unquoted, unincorporated or AIM companies is higher risk and these should be seen as longer term and less liquid investments
But caution is required. If the trustees later reinvest the proceeds into non-BR assets, the relief is lost and the gift is reassessed under the new rules, which could potentially trigger IHT.
This can also be a complex area, so if you’re considering transferring business shares into trust you should also consider seeking appropriate legal advice.
Other key planning areas
While trusts are a powerful option, other considerations include:
Succession and cashflow planning
If the business is to be retained within the family, who will run it? Will the next generation need access to cash or income from the shares? Creating and implementing a thorough succession planning strategy can allow the business assets to transfer in an orderly fashion, while also ensuring the original business owner is financially secure in retirement.
Liquidity planning through life insurance
If no planning is done, the estate may owe a large IHT bill while still owning a trading business. Life cover held in trust could provide liquidity without needing to sell key assets.
The costs for these policies can be substantial, particularly in later years, so this cost needs to be weighed against the other planning options that are available You should also keep in mind that an insurance policy will end if you do not make payments and there will be no cash value unless a valid claim is made.
Help secure your legacy with Evelyn Partners
These changes mark the most significant tightening of BR and APR in a generation. The £1 million cap is a sharp departure from the unlimited exemption many have built their planning around.
But there is time to put robust planning in place. Trusts, succession planning, and share structuring all have a role to play, but timing is everything.
At Evelyn Partners, we can help you model your exposure, evaluate your options, and act decisively, before the rules change for good. Need advice on your estate planning strategy? Book an appointment or speak to your usual Evelyn Partners contact.
