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Many business owners are sleep walking towards the biggest shake up in IHT…and it could be costly

ended 10. June 2026

The tax playbook for UK business owners is being rewritten. 

Recent changes to Business Property Relief (BPR) and the move to bring pensions into the Inheritance Tax (IHT) net from April 2027 are forcing a rethink of a long-standing strategy: build wealth inside the company and rely on reliefs to pass it on tax-efficiently.

Now, many owners face a three-way squeeze: corporation tax on retained profits rising IHT exposure as BPR narrows, and pensions losing their historic protection.

Many are shifting balancing the traditional approach of minimising tax today and maximising after-tax family wealth over the long term.

In response, business owners are diversifying. Pensions still matter but have different considerations . More are extracting and investing personally for flexibility, using ISAs and GIAs, or planning across spouses and generations. Family Investment Companies and trusts are in focus for moving future growth outside the estate, while some are simply choosing to invest surplus cash more actively rather than leaving it idle.

There’s also renewed interest in using insurance to fund, rather than avoid, inheritance tax, especially where businesses are intended to stay in the family.  

The core strategic pivot: don’t just accumulate and rely on reliefs...structure, diversify and plan early for liquidity and succession.

  • Are thousands of UK business owners sleepwalking into an IHT problem?
  •  Or are they quietly reshaping how wealth is built, held and passed on ahead of the 2026–2027 changes?
  • Any other thoughts?

Responses by tomorrow.

7 responses from the Newspage community

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Editor
Riz Malik
Independent Financial Adviser at R3 Wealth
Business owners need to priortise their own financial planning before it is too late. Many forgo their market value during their career hoping to be compensated on exit. However, those exits don’t always go as planned. If you are a business owner, make time to seek professional advice to avoid the pitfalls many who are unaware face.
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Anita Wright
Chartered Financial Planner at Ribble Wealth Management
Plenty are sleepwalking, and a quieter, sharper bunch are already moving. That's usually how it goes when the rules change. The well advised act early and the rest find out late. For years the message was build it up inside the company and let the reliefs do the work. Now corporation tax bites, the relief narrows, and pensions get pulled into the net from 2027. The same wealth, taxed three ways instead of one. The goalposts didn't just move, they multiplied. The owners getting this right are spreading it out, across ISAs, across spouses, across generations, and thinking about liquidity before the bill lands rather than after. Don't build your plan on a relief a government granted, because what one Chancellor gives, the next can quietly take back. Structure for the rules as they are, and assume they'll change again.
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Paul Denley
CEO at Oakham Wealth Management
The old playbook - retain profits, lean on BPR, and grow pensions that sit outside the estate - no longer holds. From April 2026, the BPR rules are being tightened, with a new allowance cap and reduced relief above it.

The owners adapting fastest are treating tax, succession and liquidity as one conversation rather than three. Family Investment Companies, trusts, spousal diversification and insurance based IHT planning are not new tools, but they are becoming more relevant as traditional reliefs become less relevant.

The real risk is not the tax charge itself, but liquidity at the wrong moment: a forced sale, a strained succession, or a business passed on intact but short of the cash needed to settle the bill.

Some owners are sleepwalking. Many are simply waiting for certainty that may never arrive. The sensible response is to plan early, diversify and build flexibility. Wealth preservation increasingly depends on structure, liquidity and succession planning.
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Samuel Mather-Holgate
Managing Director & IFA at Mather and Murray Financial
The old tax playbook for business owners is being rewritten. For years, many entrepreneurs built wealth inside the company, left pensions untouched and relied on tax reliefs to pass assets on tax-efficiently. That is no longer a safe assumption.

With BPR being restricted from April 2026 and pensions coming into the IHT net from April 2027, some owners may be storing up a future liquidity problem for their families.

The smarter shift is from simple accumulation to proper structuring: using pensions more carefully, extracting wealth where sensible, spreading assets across spouses and generations, considering trusts or family investment companies, and using insurance where an IHT bill is likely.

This is not the end of tax-efficient planning. But it is the end of sleepwalking. Business owners need to think earlier about how wealth is built, held and passed on.
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Nouran Moustafa
Practice Principal & IFA at Roxton Wealth
Yes, many business owners are sleepwalking into an inheritance tax problem because the old comfort blanket is being pulled away. For years, the strategy was often: build value inside the company, use pensions for tax efficiency, and rely on reliefs later. That approach now looks too passive.

The danger is not just the tax bill. It is liquidity. A family can inherit a valuable business but still struggle to find cash to meet IHT without selling assets, taking debt or damaging the company.

The smarter owners are already moving from accumulation to architecture. That means reviewing retained profits, pensions, shareholder structure, spouses, children, trusts, Family Investment Companies, insurance and succession properly.

This is not about avoiding tax at all costs. It is about not leaving your family with a beautiful business and an ugly liquidity problem.

The new playbook is simple: diversify, document, insure where needed and plan early. Reliefs should support a strategy.
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Ross Lacey
Director & Independent Financial Adviser at Fairview Financial Management
Pensions still play an important part in profit extraction for business owners, but there now needs to be even more strategy around how to keep more of what they've worked hard to build up.

Trusts are now coming back in favour, particularly those that fall under the flexibility reversionary category; offering tax benefits without complete loss of access.
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Editor
Tony Redondo
Founder at Cosmos Currency Exchange
The future belongs to those who plan early. For decades, the strategy was straightforward. Build wealth inside a company, use pension contributions to reduce corporation tax, and rely on Business Property Relief (BPR) to pass assets on tax-free. A three-way squeeze is now forcing a total rethink. Rising corporation tax, narrowing BPR, and the historic move to bring pensions into the Inheritance Tax net by April 2027 have rewritten the rules. Many smaller owners remain sheltered by the £2.5m transferable BPR allowance, but asset-rich businesses face an effective 20% levy on anything above it. Owners are responding by shifting from simple tax mitigation to aggressive liquidity and structure planning, extracting wealth earlier via ISAs and GIAs, rewriting wills, and deploying Family Investment Companies or trusts to start seven-year clocks. Idle corporate cash is being put to work, and whole-of-life insurance is surging as owners seek to fund tax bills that can no longer be avoided.