How UK Business Owners Can Pass On Their Business Without a Huge Inheritance Tax Bill

Business Property Relief inheritance tax rules can make or break a family business. If you’ve dedicated years to building a successful business, safeguarding your legacy from unnecessary taxation is paramount. Many business owners don’t realise that their company could be taxed at up to 40% the moment they die — even if they plan to leave it to their children or spouse.

In the UK, Business Property Relief (BPR) offers a significant opportunity to reduce or even eliminate Inheritance Tax (IHT) on qualifying business assets. But if your Will isn’t structured correctly, that relief — and the value you’ve built — could be lost.

With legislative changes on the horizon, it’s more important than ever to ensure your estate plan makes full use of the reliefs available. 

In this article, we’ll explain how UK business owners can pass on their business without a huge inheritance tax bill, using BPR trusts and strategic Will planning

What is Business Property Relief?

BPR is a tax relief that can reduce the value of business assets when calculating IHT. Subject to certain conditions, up to 100% relief from IHT is available on:

• A business or interest in a business (e.g., sole trader)
• Shares in an unlisted trading company
• Certain partnership interests

To qualify, the assets must generally have been owned for at least two years and still be held at the time of death

Business Property Relief 2026 Changes.

Significant reforms are scheduled that could drastically affect how BPR is applied:

• £1 Million Cap for 100% Relief: The full 100% relief will only apply to the first £1 million of combined qualifying business and agricultural property. Any value above this threshold will receive relief at a reduced rate of 50%, effectively resulting in a 20% IHT charge on the excess.
• Non-Transferability of the £1 Million Allowance: Unlike the nil-rate band, this £1 million BPR allowance is not transferable between spouses or civil partners. Therefore, strategic planning is essential to maximise the relief across both estates.

The Importance of Proper Will Structuring

A common misconception is that leaving BPR-qualifying assets directly to a spouse preserves the relief. While transfers between spouses are generally exempt from IHT, BPR is not preserved in such cases. Consequently, the opportunity to claim BPR may be permanently lost upon the second death. One of the most overlooked strategies for UK business owners planning to pass on their business without a heavy inheritance tax bill is proper trust structuring through their Will

If your Will simply leaves the business to your spouse, you could unintentionally trigger a large tax bill for your children later.

Solution.

Including a BPR Trust in your Will allows trustees to receive the business assets upon death, preserving the tax relief while still providing flexibility and support to your spouse or family. These trusts can be structured as Discretionary Trusts Wills or as part of a Flexible Life Interest Trust, depending on your specific objectives.

Take Paul, for example — a manufacturing business owner who originally planned to leave his shares outright to his wife. We helped him restructure his Will to include a BPR Trust. Not only did this preserve the tax relief, but it also ensured his children’s inheritance would remain protected in the long term.

Benefits of a BPR Trust.

• Preserves the 100% BPR relief without passing assets outright
• Allows trustees to sell or retain the business post-death
• Provides future flexibility (e.g., loan capital to spouse if needed)
• Offers asset protection from remarriage, creditors, or sideways disinheritance
• Coordinates with other reliefs and the overall estate plan

Common Pitfalls to Avoid

• Leaving shares or business interests outright to a spouse, thereby losing future BPR
• Having no Will, resulting in assets falling under intestacy rules and BPR not being applied strategically
• Using a basic Will that ignores trust planning and IHT risks
• Not reviewing the Will after business growth, restructuring, or new shareholdings

These oversights can lead to substantial, unnecessary tax liabilities for your family.

How We Can Assist

At Moneybox Wills and Trusts, we work with business owners who want to protect their companies, reduce tax liabilities, and provide for their loved ones. Our services include:

• Bespoke Wills with BPR Trusts where appropriate
• Inheritance Tax review and multi-generational planning
• Powers of Attorney and executor support

We help you make full use of Business Property Relief inheritance tax planning strategies through expert Will drafting and tailored trust structures

Next Steps for Business Owners

Your business represents one of your most significant achievements. Don’t let your loved ones lose part of it to tax. With the right Will, you can keep your company in the family — and keep more of what you’ve built.

If you’re wondering how to pass on your business without a huge inheritance tax bill, we can help you take the first step with clarity and confidence.