Changes to inheritance tax on a family business

As Managing Director at Prime, I have an overview of the implications which forthcoming tax changes will have for our clients.  

One change with potentially huge implications is the alterations to family business inheritance tax, which I’ve broken down into more detail here. If you have a question, please don’t hesitate to get in touch. 

Are family businesses exempt from inheritance tax?

Family businesses are currently exempt from inheritance tax but, following changes announced in the government’s Spring Statement, they will no longer be exempt from the start of the next tax year, on April 6th 2026. 

A lot of media attention around this has been directed at agricultural family businesses – so some family-owned firms operating in other sectors may not be fully aware of the implications it could have for them. 

What are the changes being made around inheritance tax on a family business?

While family businesses are currently exempt from inheritance tax, from April 2026, a business which fall within an estate upon death will have inheritance tax levied on it as follows: 

• No tax on up to £1m of the company’s value 

• Inheritance tax payable on the value above the first £1m, at a 50% discount – the usual percentage is 40%, so this would mean 20% will be charged as inheritance tax 

For example: 

• A family business worth £10m will have £9m exposed through inheritance tax 

• This means those inheriting it will face an inheritance tax bill of 20% of the value above £1m – which is £1.8m. 

Could the UK’s new inheritance tax rules threaten family-owned businesses?

I believe the changes will have a negative effect on family businesses, as people seek to respond to them. For example, it might encourage business owners to take money out of their businesses to gift it instead, which in turn could stifle the company’s growth.  

There is financial planning which can be done in response to the changes – there is no one size fits all solution, as tax and estate planning is personal to each business owner.  

I would encourage anyone who owns a family business to speak to their accountant about it.  

How can Prime help me to make a plan around family business inheritance tax?

At Prime and Prime Wealth, we work with business owners to make a robust plan for their finances which works for them and their circumstances.  

Inheritance tax is a particularly emotive matter – no-one likes to consider their own mortality, but good planning can mean that matters such as inheritance tax have been addressed. This can take away a source of stress, particularly in the event of a sudden or unexpected death. 

The answer for you could be a mix of solutions involving an Independent Financial Advisor, tax planning, or a legal solution combined with tax advice. As accountants and wealth advisors, we are able to offer a suite of advice and we will signpost suitable options which could be put in place alongside our recommendations. 

It would be advisable to consider revisiting any planning done prior to the changes being announced, as previous advice will now be outdated.  

If you’re wondering how your family business will be impacted by the changes and what our recommendations would be for you, then please get in touch.