Everything you need to know…
From April 2026, the inheritance tax treatment of trading businesses will change significantly. For many successful business owners, this could represent the largest increase in taxation they will ever face, with potentially serious consequences if no planning is in place.
Put simply, shares in trading businesses will no longer fall outside inheritance tax on death.
What’s changing?
From April 2026, business assets, including shares in your own trading company, will be
included in your estate for inheritance tax purposes.
There will be an allowance of £2.5m. Above this, inheritance tax of up to 40% may apply to the full market value of the business.
When does this become a problem?
There are two common scenarios:
- You die
- A business partner or major shareholder dies
In either case, the risks tend to fall into two categories: liquidity and control.
The Liquidity Issue
Inheritance tax is usually payable within months of death.
That raises difficult questions:
Do the beneficiaries have the cash to pay the tax?
- Should the company fund it – and can it afford to?
- Do surviving shareholders want to take on debt to buy shares?
- Could beneficiaries force a sale of the business to raise funds?
Without planning, businesses can be pushed into rushed or distressed decisions at exactly the wrong time.
The Control Issue
If beneficiaries inherit shares:
- Do they want to be involved in the business?
- Do surviving owners want them involved?
- Could decision-making become slower, weaker, or conflicted?
These outcomes are rarely intentional, but they are common where planning hasn’t been
done in advance.
Why Planning Now Matters
None of us knows when we, or our business partners, might die.
For context, four male business owners aged around 55 have roughly a 1 in 5 chance that
one of them will die before age 65. These are not remote odds.
The good news is that planning does not need to involve tearing everything up or giving up control. Many strategies can be put in place early, calmly, and collaboratively.
What Good Planning Can Achieve…
Done properly, planning can:
- Substantially reduce or fund inheritance tax liabilities
- Avoid forced or distressed sales
- Protect control for surviving owners
- Prevent unintended beneficiaries influencing the business
- Give families options, not deadlines
The key is starting early enough for those options to exist. Many become more effective over time and of course none of us know what might happen to us in the future.
Plan intentionally, so that the most devastating worst case scenarios can be navigated.
About the Author
This post was written by Pathfinder, the wealth management firm who work alongside accountants and lawyers to help business owners avoid sleepwalking into avoidable outcomes.
They’re not there to replace your existing advisers, but as Independent Financial Planners for many business owners, they are uniquely placed to help ensure your Business Financial Planning is synchronised with your own personal planning and still fits your long-term goals.
If you’ve not reviewed your position in light of the April 2026 changes, or if you’ve already done planning and want to sense-check it, they’re happy to help.
Even if the inheritance tax change isn’t relevant for you yet, it’s still important to think about what would happen if something were to happen to you or a business partner – and how that would affect families and the business.
>>> find out more about Pathfinder Wealth Management.
