Over the past year, Inheritance Tax (IHT) has become a growing concern for business owners, farmers and their families.

Proposed reforms to Agricultural Property Relief (APR) and Business Property Relief (BPR) raised the prospect of significant tax bills on death, even where wealth is tied up in trading assets rather than cash.

A pre-Christmas announcement from the Chancellor has altered the picture but not removed the issue altogether.

What has changed with APR and BPR?

From 6 April 2026, business assets such as company shareholdings and business interests will fall within the IHT regime.

The first £2.5 million (previously announced as £1 million) of qualifying agricultural or business assets will benefit from 100 per cent relief.

Any value above that threshold will attract IHT at an effective rate of 20 per cent.

Where assets pass between spouses or civil partners, allowances can be combined, meaning up to £5 million may qualify for full relief.

These changes sit alongside existing allowances such as the nil rate band and residence nil rate band.

How are business owners affected by the IHT changes?

For many owner-managed businesses, value is concentrated in the business itself rather than in readily available cash.

An IHT bill, even at a reduced rate, can therefore be difficult to fund, especially where the business owner has not planned ahead.

The Government has confirmed that IHT on business assets can be paid over ten years in equal, interest-free instalments. This helps with timing, but it does not remove the obligation.

A long-term tax liability can restrict investment, dividends and future growth.

The higher APR and BPR thresholds reduce the risk of forced sales for smaller businesses and farms.

However, larger or more successful businesses may still face material exposure.

Inheritance planning options for business owners to consider

There is no universal solution that suits every business owner. Planning usually starts with understanding the scale of the potential liability.

This often includes a formal IHT review, discussions with a wealth adviser and an up-to-date business valuation.

Once the likely exposure is clear, options may include:

• Securing sufficient cash to meet a future tax bill and sheltering it from further tax where possible.
• Gifting shares to family members or key staff, sometimes using growth shares or family investment companies.
• Taking out a whole of life insurance policy written into trust to provide a lump sum for IHT.
• Planning for a future sale of the business or ensuring it is saleable if beneficiaries decide that is the best route.

Each option has legal, tax and practical implications, which is why advice is essential.

Early planning allows time to involve the next generation, structure ownership sensibly and avoid rushed decisions later.

For support with Inheritance Tax planning and business succession, speak to the TWP team.