Business Relief is Changing – What You Need to Know Now

The headlines may look rosier after December’s announcement – but the direction of travel is clear. Business Relief is being significantly restricted.

If you’re a business owner, founder, or part of a family business, it’s time to revisit your estate planning strategy. While the increase in the proposed Business Relief (BR) cap – from £1 million to £2.5 million per individual – is a welcome change from the previously mooted limit, the reality is this: many entrepreneurial families will still face substantial new inheritance tax (IHT) liabilities.

In short: the numbers have changed, but the challenge remains.

What’s actually changed?

• The Government has increased the BR exemption allowance to £2.5 million per person (or potentially £5 million for a couple with planning).
• This offers more room for smaller and mid-sized business owners – but it doesn’t eliminate the problem.
• Business Relief will still be far more restricted than it is today.

Above the threshold, business assets could now become subject to IHT in a way they previously weren’t. And when you consider other reforms in motion – such as pension assets falling into the IHT net from April 2027 – the estate planning landscape is getting tougher for business-owning families.

Why this matters right now

Previously, many business owners may have thought: “The business will sort itself out – I’ll deal with IHT later.”

That approach no longer works.

The reality is shifting. For a large number of clients, the question isn’t if there’s an IHT issue, but:

• How large is the IHT gap likely to be?
• When might it crystallise? (Death, sale, succession…)
• What’s the right combination of solutions? (Gifting, insurance, trusts, family investment companies, donor-advised funds…)

There’s no one-size-fits-all answer. But we are seeing more clients engage in much more deliberate and proactive legacy planning.

A time for reflection – and action

The December announcement is creating renewed urgency across three key areas:

1. Valuation reviews – Are your shares appropriately valued? This is critical for any planning.
2. Structure checks – Are your shareholder agreements, partnership structures, and trust arrangements still fit for purpose?
3. Funding strategies – Have you planned for how potential IHT liabilities will be covered?

How we’re helping clients (and their advisers)

At First Wealth, we’re reconnecting with our partners across law, tax and accountancy to:

• Sense-check which clients are now most exposed.
• Share what we’re seeing in the market.
• Coordinate early, proactive conversations with those most affected.

The next 12-24 months will be crucial. Early planning could mean the difference between a smooth transition and an avoidable tax shock.

Final thought: Business Relief may no longer be your relief

The increase to £2.5 million is helpful. But for many successful entrepreneurs, it won’t be enough. Legacy planning is no longer optional – it’s essential.

If your business is a key part of your estate, and you’d like clarity on what the future looks like under these new rules, we’re here to help.

Let’s talk. You can reach the Private Office team at privateoffice@firstwealth.co.uk or on 020 7467 2700.

This document is marketing material for a retail audience and does not constitute advice or recommendations. Past performance is not a guide to future performance and may not be repeated. The value of investments and the income from them may go down as well as up and investors may not get back the amount originally invested.