Succession planning for business owners and entrepreneurs - it's time to act

Published May 15th 2025

Authors

Charles Frost

Iwan Williams

There continues to be uncertainty surrounding the proposed changes to Inheritance Tax for business owners, partially fuelled by the lack of draft legislation implementing the changes announced in the October 2024 Budget. Despite this, succession planning strategies should be reviewed and progressed, particularly as the risk of further tax changes cannot be ignored.

The October 2024 Budget

Much has been said about the profound changes to Inheritance Tax (IHT) announced in the October 2024 Budget, with the restriction of Business Property Relief (BPR) likely to have a major impact on individuals who own business interests such as shares. Despite ongoing campaigning, including by Family Business UK who commissioned its own impact assessment, the Government does not appear to be reconsidering its position. Sir James Dyson has also warned of the impact stating that “the scrapping of BPR will be even more damaging than the attack on family farms”.

Draft legislation is expected and HMRC recently concluded a consultation on the reforms to Agricultural Property Relief and BPR as they apply to trusts (the Consultation). A response to the Consultation and a technical consultation on the draft legislation is expected later this year, although no publication dates have been confirmed. Draft Finance Bills are typically published in July, but the CLA has rightly raised concerns about whether such complex legislation will be ready in time.

Risks of waiting for draft legislation

Normally, it would make sense to wait for draft legislation to assess its impact. However, with the proposed changes due to come into effect in April 2026, and the risk of further changes this Autumn, the timeframe for considering and implementing effective planning strategies is narrowing.

Since the changes were announced, the focus has been on the need to implement planning before April 2026; however, there may be changes announced in the 2025 Autumn Budget, particularly to Capital Gains Tax (CGT) and the lifetime giving regime which could limit planning strategies.

Changes to CGT were a major driver for much of the planning undertaken prior to the October 2024 Budget. Although the CGT changes were less drastic than anticipated, the government has not categorically ruled out further changes.

Hypothetically, if changes to CGT or gifting rules are introduced this Autumn and take effect immediately (as some CGT changes did last October), they could limit the window for planning ahead of April 2026.

The uncertain landscape

This period is almost uniquely difficult for advisers. Clients are seeking clarity that simply does not yet exist. While professionals must avoid fuelling speculation, the potential for further CGT or gifting rule changes cannot be ignored.

Increasing the rate of CGT, restricting CGT holdover and rollover, limiting the CGT uplift on death, as well as restricting or limiting the current lifetime giving regime would all have major consequences.

The size of the challenge

The following steps illustrate the task which many business owning families are now facing:

Step 1 – understand the current position

A step that is not always as straightforward as it may sound and often requires the gathering of up-to-date information. This step can involve:

Obtaining valuations – current business and property valuations are essential. In many cases, such valuations have not been undertaken in years and valuers are in high demand.
Considering the current structure – correctly understanding the current business structure is imperative.
Assessing available reliefs and IHT exposure – considering the current eligibility for BPR and whether the business is wholly or mainly trading. Once confirmed, current IHT exposure can be assessed.
Non-tax considerations – these include family dynamics, business continuity, asset protection, and long-term goals. All should have a significant bearing on any decisions.

Step 2 – Assess the increased IHT exposure

Once the current picture is clear, the potential increased IHT liability needs to be assessed. This will have to be based on the proposed changes set out in the Budget and the Consultation— pending publication of draft legislation.

Step 3 – Consider the options

Options which may exist to mitigate an increased IHT exposure include:

Lifetime gifts – transferring assets to the next generation (although accelerated gifting can come with risk).
Trusts – the Consultation confirmed that there is a ‘window to opportunity’ to transfer assets into trust before April 2026, ‘banking’ BPR at 100%.
Corporate structures – Family Investment Companies, including restructuring existing companies, may help in passing value to the next generation.
Transfer of assets between spouses and family members – to utilise the £1 million allowance for property qualifying for BPR at 100%.
Life insurance – policies can help manage liquidity to pay for future tax liabilities.
Wills – review and potentially revise will structures. Leaving everything to a surviving spouse may no longer be the most efficient approach given the £1 million allowance is not transferable.

Step 4 – Decision time

Business owners must then make difficult decisions – often under compressed timelines. These choices usually take years of consideration, but the timeframe now forces rapid assessment. Retaining income and control, preserving family harmony, and ensuring business viability are all key considerations.

Step 5 – Implementation

Once a path is chosen, implementation may take time. The complexity of some plans will require sustained work from advisers and legal professionals. As the April 2026 deadline approaches— and with another Autumn Budget potentially looming— professional capacity will be stretched.

Act before further uncertainty

The 2025–26 tax year may prove to be one of the most challenging in decades for business owners. Succession plans will need rethinking across the board. Given the scale of potential exposure and risk of additional policy shifts, waiting for greater certainty may carry even greater risk.

Now is the time to act.

Our Tax, Trusts & Succession and Corporate teams have significant experience in working together to advise business-owning clients on their succession planning and efficient structuring. Please contact Charles Frost, Iwan Williams, Cathy Bryant or Adam Kean to discuss this further