For decades, one of the quiet certainties of running a family business in the UK was that, in most cases, you could pass it on to the next generation free of inheritance tax. That certainty ended on 6 April 2026.

It’s not the only change. The tax on selling a business has risen, the relief for selling to your employees has been cut, and a new Chancellor delivers his first Budget on 28 October. For Lancashire’s business owners, whether your exit is two years away or twenty, this autumn is a genuinely important moment to get the groundwork in place.

What changed in April

Business Property Relief (BPR) has long allowed qualifying business assets, such as shares in an unlisted trading company, to pass on death or be gifted free of inheritance tax. Until this April, that relief was unlimited.

From 6 April 2026, 100% relief applies only to the first £2.5 million of combined agricultural and business property, with value above that receiving 50% relief, an effective inheritance tax rate of 20% on the excess. Any unused part of the allowance can be transferred between spouses and civil partners on death, which means a couple can potentially shelter up to £5 million of qualifying assets at the full rate.

There are other details that matter. Shares listed on AIM now qualify for only 50% relief, and the option to pay inheritance tax in ten interest-free annual instalments has been extended to all assets qualifying for BPR or APR, which can help families avoid a forced sale to settle a tax bill.

To see what this means in practice, consider a business worth £5 million owned by one person with no transferred allowance. Under the old rules, the shares could pass with no inheritance tax at all. Now, the first £2.5 million receives 100% relief and the rest 50%, producing an inheritance tax bill of £500,000 that simply didn’t exist before.

The picture is more complicated still for owners whose wider wealth includes pensions. From April 2027, most unused pension funds will be included in the estate for inheritance tax purposes, with no BPR or APR available. For business owners who have relied on both their company and their pension as tax-efficient ways to pass on wealth, the combined effect deserves a careful look.

Why this changes the exit conversation

Under the old rules, many advisers would point out that holding on to a business until death could be surprisingly tax-efficient: unlimited BPR meant no inheritance tax, and the capital gain built up over a lifetime disappeared on death. For larger businesses, that logic no longer holds so neatly. And ending that capital gains “uplift on death” is one of the measures most often rumoured ahead of this year’s Budget.

That doesn’t mean everyone should rush to sell. It means the decision about when and how to exit now has real tax consequences in both directions, and it’s worth running the numbers properly rather than relying on assumptions made under the old rules.

The main exit routes, and what they cost

A trade sale or management buyout. Selling to another business, an investor or your own management team typically triggers capital gains tax. Business Asset Disposal Relief (formerly Entrepreneurs’ Relief) still helps, but less than it did. From 6 April 2026, qualifying gains are charged at 18%, up from 14% last year and 10% before that, and the lifetime limit remains £1 million of qualifying gains. Gains above that limit are taxed at the normal rates, which for most business owners means 24%. The qualifying conditions (shareholding, employment and holding period) need to be met in full, which is why checking them well in advance matters.

An employee ownership trust (EOT). Selling a controlling stake to a trust for the benefit of employees has become an increasingly popular route, particularly for owners who care about preserving the culture and independence of the business they’ve built. The tax relief is now less generous: for disposals from 26 November 2025, capital gains tax relief on sales to an EOT was restricted from 100% to 50% of the gain.

We’ve seen employee ownership work well here in Lancashire. Granby, a Lancashire fulfilment business, made the transition with local legal support, and its co-owner’s advice to others is refreshingly honest: if it’s a financial transaction you’re looking for, employee ownership isn’t for you, and a trade route would be better. It’s about shaping the future of the business, not maximising the sale price. That’s a useful test for any owner weighing up the option.

Family succession. Passing the business to the next generation, either during your lifetime or on death, remains a common goal. BPR still makes this far more tax-efficient than for most other assets, provided the value sits within the available allowances. Above that, families now need a plan for how any inheritance tax would be funded. Lifetime gifts need care too: gifts of business assets made on or after 30 October 2024 may reduce the relief available if the donor dies on or after 6 April 2026.

Five steps to take before year-end

1. Get a realistic valuation. Many owners have a number in their head. Fewer have tested it. A proper valuation shows whether your estate sits inside or outside the new BPR allowance and gives you a realistic starting point for any sale. It may also reveal things a buyer would mark down.
2. Decide what you actually want. Maximum sale price? Continuity for your staff? Keeping the business in the family? A gradual step back? The right strategy follows from the answer, and different family members or shareholders may have different answers.
3. Make sure your paperwork tells the same story. Your shareholdings, shareholder agreements, wills and any trusts should all point towards the same outcome. With the BPR allowance now transferable between spouses, how shares are owned and how wills are drafted can make a very significant difference to the final tax bill.
4. Protect the business while you plan. An exit plan assumes you’ll be around to carry it out. Key person protection can provide the business with funds if an owner or vital team member dies or becomes seriously ill. Shareholder protection can give the remaining owners the means to buy a deceased shareholder’s stake, so the family receives fair value, and the business stays in the right hands. These are often overlooked, and they’re far cheaper to arrange while you’re healthy.
5. Watch the Budget, but don’t act on rumour. The Autumn Budget on 28 October could bring further changes. Tax changes normally apply either from announcement or from the following April, and Budgets sometimes include anti-forestalling rules that catch transactions rushed through beforehand. Better to have your options mapped out so you can respond calmly once the detail is published.

Planning that joins up

The mistake we see most often is treating exit, succession and protection as separate problems handled by separate people at separate times. In reality, they’re closely connected. The way you structure your exit affects your inheritance tax position. Your inheritance tax position affects how much protection your family and business need. And all of it depends on a realistic view of what the business is worth and what you want from it.

If you’re a Lancashire business owner thinking about the future, we’d welcome the chance to talk it through. Book a corporate planning consultation with Questa and our chartered team will look at your exit options, succession plans and key person protection together, working alongside your accountant and solicitor, so you have a clear, joined-up plan heading into the new year.

This article is for general information only and does not constitute financial, tax or legal advice. Tax rules are complex, subject to change, and their effect depends on individual circumstances. Figures correct as of September 2026.