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Under English law, it is possible to choose who inherits your assets following your death by making a will. If you die without having a will in place, there are set provisions known as the intestacy rules which dictate who gets what.
Whilst a will should be regularly reviewed to ensure it still reflects your wishes, this does not always happen. With the forthcoming changes to Business Property Relief (BPR), now is an opportune moment for any business owners to review the arrangements they have in place, in addition to considering any lifetime succession planning they may wish to undertake.
Under the current rules for BPR, 100% relief for inheritance tax can be claimed on death for qualifying business property. BPR is an extremely valuable relief and has been a way to ensure the family business remains intact when passing to the next custodian.
However, from 6 April 2026, the unlimited 100% relief from inheritance tax on qualifying business (and agricultural) property is due to be capped at £1 million per person, with qualifying assets above this value being subject to inheritance tax at half of the standard rate. For many business owners, this will significantly increase the inheritance tax due on their death and may mean that assets will need to be sold to raise funds to pay the tax.
Whilst we are awaiting the draft legislation, it is currently proposed that the £1 million will not be transferable between spouses/civil partners (unlike the nil rate band and residence nil rate band). In other words, if the £1 million allowance is not used and ‘banked’ on the first death, it will be lost.
Depending on how your will is currently drafted, it may be that your estate is not able to use the £1 million allowance on the first death, for example, if your will currently leaves everything to your spouse. Whilst it may be possible to vary someone’s will after they have died, this relies on the surviving spouse having the requisite capacity to do so. The prudent course of action is therefore to review your will now to ensure it is as tax efficient as possible in light of the upcoming changes.
Other important documents to review include partnership agreements and company articles. A partnership agreement, for example, can trump the wishes within your will and so it is important to ensure the documents dovetail to avoid any nasty surprises following your death. We work closely with our colleagues in Corporate/Commercial teams to ensure everything aligns.
If you would like any assistance reviewing your will or are not sure how these changes may affect you, please do not hesitate to contact a member of our Tax, Trusts & Succession team.
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