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For over 30 years, the UK’s inheritance tax (IHT) framework has supported and encouraged business continuity with generosity in reliefs such as Business Property Relief (BPR).
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This relief, which is currently available at 100%, has enabled business owners to pass on business assets to the next generation in a tax efficient way, with minimal disruption. In NI, where our economy is heavily reliant on private and family-owned enterprises, this has been especially important.
Over this time, the value of Northern Ireland businesses has risen considerably, fuelled by global asset price growth, increased export activity, and expansion into high-growth sectors such as fintech, software, and cyber security. Yet despite these rising valuations, IHT exposure on business assets has largely remained theoretical—until now.
What’s changing?
In the 2024 Autumn Budget, significant reforms to BPR were announced that will reshape estate planning for business owners across the UK. With effect from 6 April 2026, full (100%) BPR will be restricted to business assets valued up to £1 million per person. For any value above that threshold, only 50% relief will be available—effectively subjecting the excess to a 20% IHT charge.
While IHT is technically a personal tax, the burden may well fall on the business, especially when the estate’s liquidity is tied up in company assets. This shift poses a new challenge for many NI businesses, and it can be costly, making succession planning more critical than ever.
The unique economic background in Northern Ireland—characterised by a high concentration of intergenerational family businesses and relatively few public companies—makes it essential for business owners to rethink their tax strategies now.
Strategies
Historically, many business owners opted to hold on to their business assets until death, relying on the assurance of 100% relief from IHT and the capital gains tax (CGT) free uplift to market value upon death. The strategy of ‘doing nothing’ would have appeared sensible for many. Under the new rules, however, this strategy may now come at a significant tax cost.
For those expecting to pass on valuable businesses exceeding £1 million in value, the decision to hold assets until death could trigger substantial IHT liabilities. While gifting assets is an alternative, such gifts must be made at least seven years before death to fall outside the IHT net—and gifts made now will be subject to the new relief rules if death occurs after 5 April 2026.
NI’s large family-owned businesses have long benefited from tax-efficient succession, often transferring ownership through lifetime gifts or trusts. The revised BPR rules could alter how these families structure and manage their businesses.
Given that each individual can still benefit from a £1 million allowance with 100% relief, spreading shareholdings across multiple family members could help to optimise tax efficiency. At the same time, alternative ownership models—such as trusts—could provide additional protections.
Although trusts face their own IHT charges (up to 3% of the value of business assets every 10 years), these can often be planned for in advance and are generally easier to manage than large IHT bills arising upon a (perhaps unexpected) death. Importantly, there is a limited window of opportunity: transferring shares into a trust before 6 April 2026 should still qualify for 100% BPR. After that date, such transfers are expected to immediately trigger a tax charge. In addition, NI business owners cannot be sure that the 2025 Autumn Budget will not give rise to further challenges that will impact them.
Entrepreneurs who may be considering a sale of their businesses in the future, face another unique challenge. During the growth phase that typically occurs ahead of a sale, their estates will likely become increasingly exposed to IHT, especially in the event of an unexpected death.
In these cases, protection strategies such as life insurance and options for restructuring should be considered to cover potential tax liabilities. Once a business is sold, the proceeds ultimately become fully exposed to IHT. However, the former owners typically gain a level of liquidity that provides greater flexibility for managing their tax position.
Planning ahead
These changes herald a new era for business succession and estate planning. Business owners in NI should act now to assess how the new BPR regime affects them—and take steps to mitigate potential tax burdens before April 2026 (or, where possible, before the 2025 Autumn Budget).
Every situation is unique, and designing the right plan will depend on the size, structure, and specific objectives of the business and its owners. What is clear is that the stakes have changed; the longstanding assumptions about IHT and business assets no longer hold. Proactive, informed decision-making is essential to safeguard the continuity of businesses and the financial legacy of their owners.
With the right advice and strategic planning, NI’s business leaders can meet this challenge—ensuring that their companies continue to thrive for generations to come.
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