Family Matters: Business Relief changes and protecting your family business

The recent changes to Business Relief mark a significant shift for business owners. With reliefs more constrained and increased scrutiny on valuations, family matters such as succession, control and long-term continuity are now firmly in focus. 

As part of our Family Matters campaign, we’ve recorded a session designed to help business owners and families understand how the changes may affect personal wealth, business strategy and the transfer of value to the next generation.

Key takeaways

Business Relief changes are creating new IHT exposure

With relief now capped at £2.5 million per individual (£5 million per couple) and only 50% relief above this, many business owners will face an effective 20% tax on excess value, often resulting in material liabilities where none existed before.

Valuation is now central to planning

It is no longer enough to qualify for relief. Understanding what sits above the cap is critical, meaning valuations, and how they are supported, will play a much more prominent role, with increased scrutiny expected from HMRC.

Planning is becoming more proactive and structured

Business owners are increasingly combining strategies such as lifetime gifting, trusts and growth shares to move or cap value over time, rather than relying on holding assets until death.

Liquidity is a key challenge

Even where a liability is clear, the cash to fund it is often tied up in the business. Funding strategies, whether through extraction, share buybacks or financing, must therefore form part of the overall plan.

Insurance is playing a growing role

Insurance is being used more frequently to cover residual exposure or gifting risk, but typically as a complement to planning, once the underlying liability has been quantified.

Early, joined-up planning is essential

Business owners are moving from a position of limited IHT exposure to one where coordinated tax, legal and succession planning is needed to both manage the liability and ensure it can be funded without impacting the business or wider family.

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