Updating wills and trust structures, obtaining accurate asset valuations and evaluating alternative instruments such as life insurance policies or family investment companies are steps that many entities are already considering.
The United Kingdom is preparing for a revolution in the taxation of business and agricultural inheritances . With the Budget of 30 October 2024, the government announced far-reaching changes to inheritance tax, business property relief, and agricultural property relief . This change, effective 6 April 2026, will force many entrepreneurs, both resident and non-resident, to radically rethink their succession strategies .
The most significant change concerns the exemption cap : from now on, the full 100% benefit will be limited to the first £1 million of combined business and agricultural assets for each individual or existing trust. Beyond this threshold, the exemption will be reduced to 50%, with an effective tax rate of 20% on the excess value. Further complicating the situation is the fact that this new limit cannot be transferred between spouses , unlike other inheritance tax exemptions. In the past, exemptions were unlimited as long as the legal requirements were met: the scope of this restriction is therefore clear.
Equally important is the change that has already been in effect since 6 April 2025 , which concerns the taxation criterion for inheritance tax purposes : the system will move from a domicile-based system to one based on residence . The new approach promises greater consistency, but will require a complex analysis of the tax history (including residence) over the last twenty years to determine whether an individual can be considered a long-term resident. For non-residents , assets located in the United Kingdom— real estate, company shares, bank accounts —will remain taxable, with the possibility of incurring cases of double taxation that must be assessed individually , despite the presence of international treaties. The new rules also impact existing trusts (with or without English assets), where certain events, both personal and financial, can produce significant tax consequences (for example, the loss of English residency could generate an “advance” of taxation for the purposes of the aforementioned tax).
For family businesses , the consequences could be severe. Many entrepreneurs who until recently expected to pass their businesses to their heirs tax-free will now find themselves facing a potentially significant level of taxation, often without the necessary liquidity to meet this obligation. This scenario could trigger forced sales, loss of family control, and tensions among heirs . The attractiveness of investing in unlisted companies, such as those on the AIM market, also risks being drastically reduced, since the exemption will only be partial.
The reform, however, isn’t just a matter of numbers. It’s also a family issue. With the seven-year rule on lifetime gifts still in effect , many families could accelerate asset transfers before inheritance. In this context, establishing precise rules for effective and efficient family governance becomes increasingly crucial and strategically central. Clear rules, official documentation, and shared processes are needed to avoid conflicts and ensure continuity. Updating wills and trust structures , obtaining accurate asset valuations , and evaluating alternative instruments such as life insurance policies or family investment companies are steps that many businesses are already considering.
