Navigating 2026 Inheritance Tax Changes: Gifting shares to mitigate tax burden
In the 2024 Autumn Budget, Chancellor Rachel Reeves announced plans to reform Agricultural Property Relief (APR) and Business Property Relief (BPR) from April 2026.
At present, transfers of BPR qualifying shares into a trust can benefit from 100% relief and are not subject to immediate Inheritance Tax (IHT). From 6 April 2026 however, this amount will be capped – only the first £1m of qualifying assets will be exempt from IHT, and assets over £1m will yield a 50% relief, at an effective rate of 20% instead of the current 0%.
What is the impact of the changes to APR and BPR?
The incoming changes will significantly impact the tax liability of many privately owned businesses, particularly capital-intensive businesses with modest incomes.
Historically, assets within family-owned businesses were largely exempt from IHT, which supported business continuity and allowed business owners to transfer their assets efficiently. The new rules however introduce limits on relief, posing serious succession and sustainability challenges.
The tax and practical implications for affected businesses will be significant, and the need to formulate a plan to deal with the potential of a considerable tax burden is crucial.
How gifting shares could help mitigate tax burden
Craig Simpson, Tax Partner here at Bates Weston estimates that the proposed changes may impact up to 700,000 of the UK’s 5.5 million private businesses. He notes “The new IHT regime represents a serious challenge for private businesses. While the government argues the changes target only a few wealthy individuals, the broader implications are substantial. Proactive succession and tax planning is essential now more than ever. Without proper planning, many family-run and capital-intensive businesses face financial and operational difficulties during succession.”
He adds “One planning option to consider is gifting shares. Gifting shares during a business owner’s lifetime is one of the most effective ways to mitigate IHT. Significant gifts to trusts or family before April 2026 can still attract 100% BPR, assuming the shares qualify. This lowers the overall value of the estate, reducing potential tax burdens, and can also help to safeguard the future of their business for their family.
“Gifting shares may be particularly beneficial for younger business owners too, as if the donor survives for seven years post-transfer the gift will be excluded from IHT calculations.
“It is important to note that every situation will differ, and the objectives of the shareholders will need to be determined in order to formulate a longer-term wealth transfer plan.”
Get in touch
Business owners have a window of opportunity in which they can mitigate potential tax liabilities before the end of the 2025/26 tax year, through efficient and well-structured tax planning.
Here at Bates Weston, our specialist tax team works closely with business owners and their families, offering integrated, tax-efficient solutions that align with your broader objectives. Should you like to speak with a member of our friendly team, please get in touch.
