The rules changed in April. Your planning probably hasn’t.
For decades, a trading business passed down free of inheritance tax with no ceiling. That ended on 6 April 2026. If your succession plan was built before then, it was built on rules that no longer exist.
Eleven questions, about five minutes. No cost, no obligation.
What actually changed
Business relief and agricultural relief used to remove qualifying assets from your estate entirely, with no upper limit. From 6 April 2026:
Still fully relieved
The first £2.5 million of combined business and agricultural property still attracts 100% relief.
Effective rate above it
Above the allowance, relief drops to 50% — an effective inheritance tax rate of 20% on the excess.
For a married couple
The allowance is transferable between spouses and civil partners, so a couple can pass up to £5 million with full relief.
Years to refresh
The allowance refreshes every seven years for individuals and every ten for trusts. AIM shares no longer attract 100% relief.
One point worth knowing before you read anything else
The cap was originally announced at £1 million and raised to £2.5 million in late December 2025. A great deal of the commentary still online was written before that and states the lower figure, often alongside the claim that the allowance is not transferable. Both are out of date. If you have already had advice on this, check when it was given.
Who this hits hardest
Unmarried business owners
Transferability applies to spouses and civil partners only. A cohabiting couple of thirty years is capped at £2.5 million with nothing passing to the survivor. This is now one of the largest single planning gaps in the UK.
Businesses that grew past the threshold
Relief used to be unlimited, so most succession planning simply assumed the business was covered. That assumption is no longer safe above £2.5 million.
Owners holding premises personally
Property owned by you and used by your company typically attracts relief at a lower rate than the trading company itself — a structure that was largely cost-free before the cap and is not any more.
Anyone with an older shareholder agreement
The trap that costs the most and is spotted the least. See the traps below.
AIM portfolio holders
The relief position on AIM shares has changed outright.
Anyone planning a sale
A sale converts relieved business property into unrelieved cash, and the planning window closes at completion.
A trading company worth £6 million
Relieved in full. No inheritance tax on the business, at any value.
£5 million fully relieved using both allowances. £1 million relieved at 50%, leaving £500,000 chargeable.
£2.5 million fully relieved on one allowance. £3.5 million relieved at 50%, leaving £1.75 million chargeable.
Same business. Same family. A £500,000 difference in outcome, decided by marital status and whether anyone revisited the plan.
Four traps, in order of what they cost
- 01The shareholder agreement that destroys the relief
If your agreement obliges the surviving shareholders to buy and the estate to sell, HMRC may treat the shareholding as a right to cash rather than as business property — and business relief can be lost entirely. The fix is well established: a cross-option arrangement, where each side has an option rather than an obligation, backed by life cover to fund it. The difference is a few clauses. The cost of getting it wrong is the entire relief on the shareholding. The single most expensive drafting error we see, and most owners have never had their agreement checked against it.
- 02Cash sitting on the balance sheet
Surplus cash not required for the trade can be treated as an excepted asset and stripped out of the relief. Businesses that have accumulated reserves for good commercial reasons frequently find part of their value unrelieved.
- 03The property arm
Relief is for trading businesses. A company that is wholly or mainly investment — including property letting — does not qualify, and a trading company with a substantial property investment arm may find the whole position argued. Group structures need looking at as structures, not as a list of parts.
- 04The two-year rule, and the sale you are planning
Assets generally need to have been held for two years to qualify. And a business sold before death converts relieved business property into unrelieved cash. Exit planning and estate planning are the same conversation, and they are almost never had at the same time.
What can be done
Review the shareholder agreement first
Highest impact, lowest cost, quickest to fix.
Use both allowances
For married couples, the structure of the wills determines whether the transferable allowance is actually available. For unmarried couples, the position needs a deliberate decision rather than an assumption.
Look at the structure, not just the will
Whether trading and investment activities sit in the right places, whether premises are held in the right name, and whether reserves are doing identifiable work.
Fund the liability rather than fighting it
Where tax will arise, life cover in trust provides the cash without forcing a sale or a distress dividend. For business owners this is often the difference between a company that survives a death and one broken up to pay a bill.
Plan the exit and the estate together
A sale changes the entire position, usually badly, and usually with more warning than people use.
Revisit it on a cycle
These rules moved three times in fourteen months. A plan reviewed once is a plan that will be wrong.
What doesn't work
Assuming the business is covered
It was, without limit. It isn’t.
Advice given before December 2025
Even competent advice given before then was built on a £1 million non-transferable allowance. The conclusions may still hold; the arithmetic will not.
A will that leaves everything to a spouse and stops there
It defers the tax rather than addressing it, and can waste an allowance in the process.
Waiting for the rules to change back
They may. Planning on that basis is a position, not a plan.
How we'd approach it
A solicitor drafts. An accountant calculates. An adviser invests. Here, they're all in the same practice, working to one standard set by our TEP-led technical team.
Most relevant to this situation
Or speak to someone directly
For individuals and families with assets over £2 million, and for business owners. A senior practitioner completes your review with you, by phone. Same eleven questions, same report; you just don't have to type it.
Questions we get asked
Does my business definitely qualify for relief?
Not automatically. It has to be wholly or mainly trading, and the detail matters — reserves, property, group structure and how long you have held it.
We're not married. How much difference does that actually make?
On a £6 million business, around £500,000. It is the single largest variable for many owners, and it is worth understanding precisely before deciding anything.
Can the tax be paid in instalments?
Business and agricultural property has historically had instalment treatment available, unlike most other assets. Confirm the current position for your circumstances — it materially affects whether a bill forces a sale.
I'm planning to sell in a few years. Does this still matter?
More, not less. A sale converts relieved business property into unrelieved cash, and the planning window closes at completion.
My accountant handles this.
Many do it well. The question is whether the shareholder agreement, the wills and the tax position have been looked at together by people who talked to each other — that is where the failures cluster.
Find out where you stand
Eleven questions and you'll have a report written for your situation — what's exposed, what it means, and what would change it. Checked before it reaches you, and no obligation to go further.
Start your Clarity ReportNo obligation. We'll never share your details.