Important client notice
FAO Family Business Owners
If you are the owner of a family business, either operating through a company, or as an unincorporated business, urgent attention is needed to inheritance Tax (IHT) changes, which will take effect in less than twelve months (6 April 2026).
What is changing?
Broadly speaking IHT applies as at 40% on a person’s assets above the threshold rate of £325,000. But family business owners have benefitted from a special relief called ‘Business Property Relief’ (BPR) which enables trading businesses (of any value) to be passed to the next generation without IHT, providing certain conditions are met.
In the Autumn Budget 2024, the Government announced that with effect from 6 April 2026 there would be significant restrictions on the availability of BPR, with the full relief only available on the first £1m of value. All value above £1m will only receive 50% of the relief which essentially means value above £1M will be charged to IHT at 20%.
This is the most serious and significant change to IHT in decades and will have widespread impact on business owners, particularly if they intend to pass the business on to the next generation.
Example of tax impact
Professional valuations will be required and all businesses and business sectors will be valued differently but for the purpose of illustration only, we will show a company’s valuation as X 4 profit per annum (and assume for the purpose of this example, it is owned by a single person).
Company’s Profit (Per Annum) |
Valuation (Profit x 4) (Example only) |
Taxable Amount Above of £1M |
IHT Charge |
Annual IHT paid over 10 years |
| £500,000 | £2M | £1M | £200,000 | £20,000 |
| £1M | £4M | £3M | £600,000 | £60,000 |
| £3M | £12M | £11M | £2.2M | £220,000 |
| £5M | £20M | £14M | £3.8M | £380,000 |
| £10M | £40M | £39M | £7.8M | £780,000 |
| £15M | £60M | £59M | £11.8M | £1.18M |
| £20M | £80M | £79M | £15.8M | £1.58M |
| £50M | £200M | £199M | £39.8M | £3.98M |
Get prepared – Recommended Client Timeline
Whilst the final confirmation of the rules will only come when enacted in legislation, which could be in early 2026, urgent action is needed in 2025 to allow time for potential solutions to be implemented before April. It is also highly likely given the large number of businesses impacted by these changes that professional advisory will be oversubscribed in early 2025 making it difficult to support at that time.
Step |
Purpose |
Action |
Recommended Timeline |
| 1. Awareness | It is important that all clients that are potentially impacted by these changes are made aware of the government’s proposals. | Winslows and it’s Partner Law firms to produce a briefing memo (this document) for clients to review the basic proposals. |
June 2025
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| 2. Understanding technical tax changes | To deepen the understanding of the current law and proposed changes and hear a detailed technical explanation of the situation. | Attend Winslows expert panel webinar for discussion and Q&A of submitted questions. [This is complimentary for all Winslows Partner Firm clients, subject to availability] – Register below | 9th July 2025 |
| 3. Detailed application of proposed changes to client’s specific business | Every business will be impacted differently by these changes. Bespoke consideration of each individual business is required and specific assessment of new IHT impact should be prepared. | Winslows have created a business information pack for clients to complete with all details that underpin their IHT and BPR position. On completion of the information pack exercise, clients can obtain from Winslows a tailored ‘BPR Impact Report.’ |
Mid July – Mid September
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| 4. Family review of BPR Impact Report and discussion | Clients should review the specific impact to their business set out in the BPR Impact Report and take time to consider their own objectives, such as discussing practicalities of business succession plan with their families, to ensure a clear goal is identified by all concerned. |
Mid-September 2025 – end October 2025
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| 5. Solutions strategy and tax plan | Once a detailed confirmation of if / how the changes will impact each business individual has been confirmed and clients have taken time to discuss with their families their goals and objectives, the next step is to design a tailored tax strategy to achieve these goals. | Arrange a virtual meeting with Winslows to discuss objectives and instructions for the creation of a detailed tax strategy plan to achieve goals. |
End September 2025 – End November 2025
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| 6. Implementation of tax strategy | The steps required to implement a tax strategy may vary greatly from business to business. Complex corporate group structures, or businesses holding capital assets may require corporate restructuring prior to IHT structuring. |
Winslows and it’s Partner Law firms will work together to create the corporate and private client implementation plans that will be needed to affect any tax strategy, with corporate and private client partners then leading on this work, with tax strategy oversight from Winslows. |
October 2025 – January 2026 [Our view is that to ensure implementation can be completed before changes take effect, it should be commenced no later than January – for example, some strategies may require HMRC Clearance which can take 30 days]
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