FICs and the April 2026 Business Relief Changes: What Applies to You

For a long time, Business Relief was the standard answer to inheritance tax on a family business. From 6 April 2026 that answer has a limit. If you own a Family Investment Company (FIC), or you are thinking about setting one up, it helps to separate the changes that affect you from the ones that do not.

The new shape of the relief

Business Relief and Agricultural Relief used to give 100% relief with no ceiling. Now there is a cap. The first £2.5m of qualifying business and agricultural property is relieved at 100%, per person. Anything above that is relieved at 50%.

Three practical points follow.

• The allowance can be transferred. If one spouse or civil partner dies without using it, the survivor can inherit the unused part.
• It belongs to the person, not the business. Several qualifying interests share a single allowance.
• It is not indexed yet. Linking to the Consumer Prices Index starts on 6 April 2031.

The figure was first announced as £1m and then raised to £2.5m on 23 December 2025. Older articles and government papers may still quote £1m, so check the date before you rely on them. Unquoted shares such as those traded on AIM now qualify at 50% only.

Most FICs were never in the relief

The typical FIC holds funds, shares, bonds and cash, and sometimes let property. Shares in a company whose business is wholly or mainly making or holding investments, or dealing in land, are not relevant business property. That has always been the rule.

So for an investment-holding FIC, nothing was taken away in April 2026, and the higher allowance gave nothing new. The inheritance tax case for a FIC rests on a different idea, which we come to below.

Some other rules are unchanged:

• A gift of shares to an individual is still a potentially exempt transfer. If the donor survives seven years there is no inheritance tax, and taper relief reduces the tax if death occurs between three and seven years after the gift.
• The nil-rate band of £325,000 and the residence nil-rate band of £175,000 stay frozen until 5 April 2031.
• A gift of cash straight into a company is still not a potentially exempt transfer.

Where a FIC and the relief do meet

There is one case where the new allowance matters. A FIC whose business is mainly holding trading companies can qualify for relief, because the investment exclusion does not catch it. Assets that are not used in the business, known as excepted assets, are outside the relief.

This is the position of an owner who inserts a FIC above a trading company. The £2.5m allowance then bears on the value of the trading shares. Surplus cash and investments building up in that structure can undermine the relief, so they need watching. Our page on the Family Investment Company service explains how the pieces fit together.

So why consider a FIC now?

The underlying problem has not gone away. The nil-rate bands are frozen, property and investment values have risen, and from 6 April 2027 most unused pension funds will count towards the estate. More families will have estates that reach the 40% rate.

A FIC does not cancel tax on what you already own. It changes where future growth lands. The parents hold shares with a fixed value and the votes, and the growth builds in shares owned by the children or a trust. We explain the mechanics in our post on freezer shares and growth shares.

Be realistic about the timing. Value leaves your estate only when shares, or the cash used to buy them, are given away, and gifts to individuals take seven years to drop out of account. A loan you make to the company stays in your estate until it is repaid.

Three families, three answers

• An owner with a £4m business. Business Relief is likely to be the main question. Each person can shelter £2.5m at 100%, with the rest at 50%, and a couple may be able to use both allowances. The planning issues are keeping the business qualifying and what happens on a sale.
• A couple with a £3m investment portfolio and a home. Business Relief is not available on investments. A FIC here is about redirecting growth and has nothing to do with the relief rules.
• A family with a property portfolio. Let property is generally an investment for Business Relief purposes, so the relief usually does not apply.

In each case the first job is the same: establish which of your assets qualify for relief and which do not, before choosing any structure.

What to do next

If you own a trading business, find out whether it qualifies and how much of its value sits above £2.5m for each owner. If your wealth is in investments or property, ask whether the growth you expect justifies building a structure around it.

This article is general information, not advice. Tax rules change and their effect depends on your circumstances. If you would like to talk through your own position with our specialist team, book a call. Advice is prepared by our specialist team and reviewed by a Chartered Tax Adviser, and your first call is free.

To explore Family Investment Companies further, visit our specialist practice, Family Investment Company.