The October 2024 Budget introduced the most significant changes to Inheritance Tax (IHT) planning in a generation. While much of the public discourse has focused on an uproar from farmers—whose ability to pass on their farms tax-free is now under serious threat—there’s another group facing equally serious implications: all business owners.

Despite the same tax changes applying the same level of outcry hasn’t been heard from the business community. Yet, for those owning shares in trading businesses— where those shares are valued at over £1 million—the situation is just as pressing and, if unaddressed, could prove devastating to succession plans.

Previously, owners of trading businesses could take advantage of generous IHT reliefs, often allowing them to pass the shares down to the family without triggering significant tax liabilities. But the changes announced in the Budget mean that this is no longer possible.

Under the new rules, Inheritance Tax of 20% is now chargeable on the value of business shares exceeding £1 million upon the death of the shareholder. For many business owners, the majority of their wealth is tied up in the business rather than in cash or liquid assets. This creates a potentially serious liquidity problem: where will the funds to pay the tax come from?

Without proper planning, this tax could force the sale of shares at an inopportune time—possibly at a discount—and may even compromise the viability of the business as a whole. Worse still, if you don’t hold a controlling share, you may not have the power to compel other shareholders to sell alongside you, further reducing the potential value realised.

Act now: The 6 April 2026 deadline

Some business owners are now considering placing shares into trust as a way of mitigating their future IHT liabilities. Done correctly and before the 6 April 2026 deadline, this strategy may offer significant tax advantages.

However, the rules around trusts and tax reliefs are complex. Timing and structure are critical. Delaying action until this deadline is near could drastically limit your options.

At Geldards, we understand the intricacies of Inheritance Tax law and the unique pressures facing business owners today. Whether you run a manufacturing company, a service-based business, or a growing SME, the financial legacy you leave behind needs to be carefully protected.

Planning ahead

There are proactive steps you can take now to mitigate the exposure to these issues. This includes strategies like:

• Lifetime gifts
• Use of trusts
• Corporate restructuring
• Life insurance
• Tailored succession planning

If you’re a business owner with concerns about how the new Inheritance Tax changes could affect your estate, it’s crucial to seek professional inheritance tax planning advice without delay. Debra Martin, one of our experts in business succession planning, is here to help you explore your options and put in place a plan tailored to your unique circumstances.

If you want to learn more about the options to mitigate the liability in relation to your specific position, then please contact Debra Martin