The Chancellor’s Autumn Budget calls time on three decades of a relatively benign inheritance tax treatment of wealth comprised in trading business. 

Since 1996, 100 per cent business property relief (BPR) from inheritance tax (IHT) has enabled owners of qualifying businesses to transfer the business on death with, in most cases, no IHT. That is set to change. 

For IHT chargeable events – mostly death, but lifetime gifts are also relevant – occurring on or after 6 April 2026, 100 per cent BPR will be restricted to the first £1m of value. 

Any surplus value over that will only qualify for relief at 50 per cent and the remaining value is taxed at the headline rate of IHT, 40 per cent (assuming the taxpayer’s nil rate band from IHT is used elsewhere). 

That’s an effective rate of 20 per cent on the surplus value over £1m. For the owner of a £5m business – where previously there was no IHT exposure – there is now an exposure of £800,000. The owner of a £10m business might now face an exposure of £1.8m. And so on. 

Those with business interests should revisit their estate and succession plans to ascertain the impact of the changes before they take effect in April 2026. 

Where a business owner has a spouse or civil partner, it is possible with planning to obtain two £1m bands – saving up to £200,000. 

For those owning businesses through corporate structures, do not forget that in addition to finding funds to pay IHT, there will also be other tax consequences in extracting the funds from the company to meet the tax. This need to fund IHT tax will likely be a driver for transactional activity. 

Those with business interests should revisit their estate and succession plans to ascertain the impact of the changes before they take effect in April 2026. 

New plans will likely be required, and we expect to see an acceleration of the timeline in which ownership is passed on to the next generation.

Mark Stewart is head of personal and family, while Tom Boulton-Jones is corporate partner at Brodies LLP.

Partner Content in association with Brodies LLP.