Before the April inheritance tax relief change, business owners should think about six things

Beginning in the spring, business owners will be impacted by new restrictions on inheritance tax-free allowances

Before the changes, those who want to sell or move their assets into a trust must take immediate action.

Entrepreneurs and family business owners are being urged to take action now to avoid some potentially harmful tax bills ahead of changes that are scheduled to take effect in April.

On April 6, a new cap on tax exemptions for business inheritance and agricultural property will take effect. This implies that when business owners pass away, their families will probably have to pay higher inheritance tax (IHT) obligations. Financial advisors have stated that in certain instances, this could put the company itself in danger.

According to Lee Matthews, senior partner in financial planning at wealth management firm Evelyn Partners, April 6 of this year is a date that establishes a clear deadline for planning for many business owners considering the long-term prospects for their company and their family's financial security.

"They can still take action right now to reduce some potentially harmful tax obligations. Even a successful business and the jobs it creates could be destroyed by an abrupt and unexpectedly high IHT bill, especially in situations where liquid assets are scarce. The "

In April 2026, what inheritance tax change will take place?

The total value of assets qualified for 100% Business Property Relief (BPR) and Agricultural Property Relief (APR) will be capped at £2.5 million starting on April 6, 2026. Farmers and businesses may be subject to an effective 20 percent IHT charge on any value over this cap, which will only provide 50% relief.

The BPR and APR cap was initially set at £1 million, but the government later changed its mind and raised the cap.

Similar to the inheritance tax allowance (also called the nil-rate band), spouses will be able to inherit unused tax relief as a result of another recent policy change. It is not required for the deceased spouse to have owned qualifying assets in order for the surviving spouse to receive any portion of the £2.5 million allowance that was not used at death.

What steps should entrepreneurs take before April to avoid paying inheritance tax?

Before April 2026, business owners can follow a six-step process, according to Evelyn Partners Matthews, especially if they wish to sell their company or put it into a trust. Not only are the steps important, but so is the sequence in which they are completed.

One.

Determine which assets are eligible for business assistance. Business relief may not be available to every aspect of a company. Owners should examine the company's operations, balance sheet, and organizational structure, possibly with the assistance of experts. According to Evelyn Partners, large cash holdings, investment activities that gradually seep into the business, or group structures with a mix of trading and investment entities might not be eligible.

Two. Before the deadline of April 2026, think about a gift plan.

Now is the time to review gifting strategies to avoid inheritance tax, especially when trusts are involved, according to Evelyn Partners, since the rules for business relief are changing.

Shares of any value that qualify for business relief may be transferred into a discretionary trust prior to April 6, 2026, without incurring an immediate inheritance tax charge.

As of April 6, 2026, each person may only transfer up to £2.5 million worth of business relief-qualifying assets into a trust with 100% relief. Any excess over this will only receive 50% relief, which could result in an immediate inheritance tax charge.

A couple may transfer up to £5 million in eligible assets free of IHT upon the death of the last spouse thanks to the transferability of this £2.5 million allowance between spouses or civil partners.

"Trusts can be essential to succession planning, family wealth preservation, and long-term control, but they should be considered as part of a broader strategy," stated Matthews. Giving, whether directly or through a trust, needs to be reasonably priced and shouldn't jeopardize your personal financial stability. The "

If you are thinking about using trusts, give yourself plenty of time for valuations, legal drafting, and any necessary shareholder approvals.

#3.

Early ownership changes should be implemented. Matthews noted that before shares can be settled into trust or a sale can take place, many business financial planning strategies call for modifications to the ownership structure. Due to legal procedures, valuation work, and the requirement for shareholder consent, these changes frequently take longer than anticipated, so they should be completed as soon as possible.

Examples include setting up a holding company for a future transaction or developing new share classes.

"Any trust transfers must wait until reorganizations are finished," Matthews stated. "Inadequate sequencing may result in unanticipated tax exposures or unintentionally violate business relief conditions. A "

Four.

Start underwriting a life insurance policy. Business relief qualifying shares turn into cash when a company is sold. "The potential inheritance tax protection they provided is lost as soon as this occurs. The owner's estate may be exposed to significant inheritance taxes if they pass away before the proceeds are reinvested or put into a suitable structure, according to Matthews.

Although underwriting can take weeks or months, life insurance held in trust can offer a straightforward and efficient way to get through this risk period. Financial data, GP reports, and medical evidence can cause delays that could force completion too close to the deadline.

"Starting the underwriting process early can help to have cover in place when it is actually needed rather than after the event," Matthews suggested.

Fifth.

Ensure that your personal and business financial plans are in sync. Often, business owners don't think about how a sale or refinancing will affect their own wills, trusts, and estate plans. This could be dangerous.

"A new holding company may alter business relief status, or a change in voting rights may affect succession intentions," Matthews stated. In order to take full advantage of the business relief allowance or to allocate assets to trusts in a way that maximizes and preserves potential relief, wills may need to be updated. The "

To ensure that the business and personal aspects of the plan complement one another, advisers should coordinate the legal, tax, and investment teams. "Years of planning can be jeopardized by a brief misalignment at the wrong moment," Matthews cautioned.

Fifth.

Get ready for the cash from the business sale. If a business sale is the preferred course of action, owners frequently retain substantial sums of money for a while before determining how to reinvest. Evelyn Partners warned that if reinvestment is sluggish, this could result in lost opportunities and an immediate inheritance tax risk.

"A forward plan should specify how the proceeds will be managed until a long-term portfolio is established, where liquidity will be held, and whether a family investment company or personal investment company is appropriate," Matthews stated.

Preparing for this phase now lowers post-completion stress and improves the transition's overall tax efficiency.

Consult a financial advisor.

In the end, it makes sense to consult a professional financial advisor who is regulated by the Financial Conduct Authority before acting due to the complexity of inheritance tax and business relief regulations. On websites like VouchedFor and Unbiased, you can locate a list of qualified financial advisors in your area.