Significant changes to Inheritance Tax (IHT), Capital Gains Tax (CGT) and Business Relief (BR) look set to become law from April 2026, so succession planning has never been more important for business owners.
SoGlos spoke to Willans LLP solicitors to get some top tips on succession planning and business exits from partner and head of corporate and commercial, Chris Wills; and partner in wills, trusts and probate, Rachel Sugden.
Plan early
Even if your business exit seems a lifetime away, planning early means that your company and your colleagues are prepared, with a clear plan in place for every eventuality.
Chris said: 'There are two main types of business exits: those made by choice – such as a trade sale, public listing, management buyout, or family succession – and those driven by necessity, including death, incapacity, or unexpected changes in circumstances.
'This makes it crucial for every business leader to consider both their ideal planned exit and how they would want an unplanned exit to unfold, regardless of their current stage in the business lifecycle. Planning early, with the support of qualified professionals, can make the exit process smoother and help maximise value or mitigate potential downsides.
'Since exit planning often takes between three and five years, identifying a target as early as possible allows business leaders to implement strategies that align the business with their desired outcome and ensure the best possible results.'
Expect the unexpected
While putting plans in place is important, nobody can predict the future – and while owners may assume that their business can just carry on without them, or that a family member can seamlessly step into their place, that isn't always the case.
Rachel said: 'It’s quite common for founders to stay actively involved in their business well into later life. However, one aspect that’s often overlooked is the risk of a sudden loss of capacity or even the unexpected death of a key individual.
'Business bank accounts may be frozen, preventing partners from performing essential tasks like paying salaries or bills. Accessing these accounts can take months, potentially causing severe – and even irreversible – harm to the business.
'For this reason, it’s crucial that all business owners have lasting powers of attorney put in place specifically for their business affairs. Choosing capable and trustworthy attorneys ensures continuity and stability. In fact, in certain regulated industries, failing to make such arrangements could result in non-compliance with professional standards.'
Prepare for upcoming tax changes
The government's planned changes to Business Relief (BR) mean that where business owners could previously pass on their commercial interests without paying inheritance tax, to prevent successful companies being burdened by big tax bills upon an owner's death, that is set to change from April 2026.
Rachel said: 'BR currently provides 100 per cent IHT relief on any qualifying interest in a trading business held for at least two years, regardless of value. However, starting in April 2026, the relief will be capped at £1 million per individual, limiting the maximum tax saving to £400,000 – whereas previously, there was no cap. Any value above the £1 million threshold will qualify for only 50 per cent relief, resulting in an effective IHT rate of 20 per cent on the excess, rather than the standard 40 per cent.
'This shift raises important questions for business owners and their advisors, particularly around how to cover the increased tax liability without putting the continuity of the business at risk. One potential strategy is to distribute BR-qualifying assets among family members during the owner's lifetime, thereby taking advantage of multiple £1 million thresholds. However, this approach may lead to challenges such as loss of control, structural changes within the business and potential strain on family relationships.
'What is clear is that time is limited. Business owners must act now and engage with professional advisors to explore their options and take steps to safeguard the future of their business.'
For more information about the upcoming IHT changes, visit willans.co.uk/knowledge/changes-to-business-relief.
Be cautious with gifting
Gifting assets while business owners are still alive is one way to counteract the upcoming IHT changes, but it isn't without its own unique challenges.
Rachel said: 'The changes being introduced from April 2026 create a strategic opportunity for individuals to plan phased gifting over time.
'However, it also adds complexity to estate planning, especially for those with high-value business interests.
'Accurate record-keeping and valuation of gifted assets will be essential to ensure compliance and optimise tax efficiency under the new regime.'
Consider an employee ownership trust
For exiting business owners in situations where there isn't a buyer lined up, an employee ownership trust could provide a tax-efficient option which also benefits the company's staff.
Chris said: 'Employee ownership trusts (EOTs) are becoming an
increasingly popular solution for business succession planning, particularly
where business owners are preparing to exit. They provide significant tax
advantages, foster greater employee engagement and help to preserve the
culture and direction of the company.
'An EOT is a type of employee benefit trust which allows
business owners to transfer the controlling interest in the shareholding of
their company to a trust which holds such shares for the benefit of the
company’s employees.
'EOTs are an attractive option for shareholder exits in circumstances where there is no obvious third-party buyer, however it is not a one-size-fits-all solution. Its suitability depends on a range of factors unique to each company – and careful consideration is essential before proceeding.'
Seek professional advice
Above all else, getting advice from a qualified professional is the very best way to ensure your succession plan and subsequent business exit are conducted correctly, efficiently and with all the relevant legal matters taken care of.
Chris said: 'No matter what exit route is most desirable, investing
in appropriate professional advice and keeping all documents and records safe
and in a well-organised manner, will ensure that if any issues arise, they can
be readily identified and addressed at the earliest opportunity.'
Rachel added: 'With regards to making a will, seeking professional advice will help ensure that your will is structured appropriately to meet the needs of both your business and your family.
'When properly arranged, a combination of cross-option agreements and insurance policies can provide business partners with the reassurance of maintaining control of the business after a partner’s death, while also ensuring that the financial value of that interest is passed on to the deceased’s family. It is essential that these documents are carefully drafted to avoid unintentionally losing any available inheritance tax relief.'
