Business Owners · Exit and succession
Succession and retirement planning for business owners
Planning how a family business passes on and how you step back, with the Business Relief changes of April 2026 and pensions in the estate from April 2027.
On this page12 sections
- Who this is for
- Business Relief after the April 2026 changes
- Pensions and inheritance tax from April 2027
- Passing on growth: freezer and growth shares
- Choosing a vehicle: trusts, FICs and holding companies
- A typical sequence
- Funding your retirement
- Common mistakes
- How we help
- Why ASWATAX
- Talk to us
- Questions answered
Key points
- 1Business Relief gives 100% relief on the first £2.5 million of qualifying property per person from 6 April 2026, then 50%
- 2Most unused pensions fall into the estate for IHT from 6 April 2027
- 3Growth and freezer shares can pass future growth to the next generation
- 4Succession is a tax, family and commercial decision together
A business that took you decades to build deserves a plan for what happens next. Whether you want to pass it to your children, bring in managers or step back gradually, the tax decisions are significant, and new rules have changed them. We help owners plan the handover and their own retirement together, so the business, the family and your income all work.
Who this is for
This page is for owners of trading companies who are thinking about the next generation, about retirement, or about what would happen to the business if they died. It is relevant if your company is worth more than your nil-rate bands, if you want family members to share in future growth, or if you are unsure who should inherit and how.
If you already know you will sell, start with exit planning. If your family is the priority, our Private Families pages cover inheritance tax planning and trusts and estates in more detail.
Business Relief after the April 2026 changes
Business Relief reduces the inheritance tax value of qualifying business property. From 6 April 2026, 100% relief applies to the first £2.5 million of combined qualifying business and agricultural property per person. Above that, relief is 50%. Any unused allowance can pass to a spouse or civil partner, and the allowance is not indexed until 6 April 2031.
Not every company qualifies. A company whose business is mainly investments, or dealing in land or property, is outside relief. Assets not used for the business, such as surplus cash or investments, can be excepted from relief. The relief is also usually lost on a binding contract for sale.
Pensions and inheritance tax from April 2027
For deaths on or after 6 April 2027, most unused pension funds and death benefits will be counted in the estate for inheritance tax. For a business owner who has built up a large pension, perhaps through employer contributions, that changes the maths.
The right order of spending, gifting and drawing from pensions needs to be reviewed in light of both inheritance tax and income tax. It is worth doing before April 2027 whatever your age, because the best answer may involve changes to how you take income from the company and the pension together.
Passing on growth: freezer and growth shares
Freezer and growth shares let you hold today's value in one class while future growth belongs to another class held by the next generation, perhaps through a trust. They can limit how much more is added to your estate as the company grows.
They are not simple to set up. Changing the rights of existing shares is treated as a transfer for inheritance tax and cannot be a potentially exempt transfer, so growth shares are usually newly issued. The valuation of both classes must be defensible. See our article on freezer and growth shares.
Choosing a vehicle: trusts, FICs and holding companies
- Direct gifts of shares are simple and can use gift holdover relief for trading company shares, but the recipient owns the shares outright.
- Trusts allow control and protection, with entry, ten-year and exit charges to plan for. See trusts and estates.
- A holding company can separate the trading company from cash and investments, helping to protect Business Relief. See our holding company page.
- A Family Investment Company (FIC) is often used for family wealth outside the business, but it does not normally qualify for Business Relief on investments. See our FIC page and the specialist site, familyinvestmentcompany.uk.
A typical sequence
Every family is different, but plans often follow a sequence:
- Understand the position. Value the company, list personal assets, pensions and any existing wills or trusts, and estimate the inheritance tax exposure on death today.
- Protect the relief. Check that the company is mainly trading, that surplus cash or investments are not putting Business Relief at risk, and whether a holding company would help.
- Decide the destination. Family, managers, trust or sale, and in what proportions.
- Move the value. Newly issued growth shares, gifts, or a trust, depending on control and tax.
- Fund your own life. Settle the income you need, the pension plan and the effect of the April 2027 change.
- Review. Rules, values and family circumstances all change, so the plan should be revisited regularly.
Funding your retirement
Succession is only half of the question. Most owners also need an income for the rest of their lives, from the company, a pension or sale proceeds. We look at the right mix of dividends, salary and employer pension contributions, and whether to leave profits inside the company. We also check what will remain in your estate if you spend less than expected.
Common mistakes
- Waiting for retirement to plan. Gifts take seven years to leave the estate, and reliefs have holding periods.
- Letting the company fill with cash. It can threaten Business Relief.
- Assuming the pension is outside the estate. That changes from April 2027.
- Giving shares without a plan for control. A gift is irrevocable.
- Ignoring fairness within the family. Children who work in the business and those who do not need clear, agreed terms.
How we help
We map your family, company and wealth, model the inheritance tax and capital gains tax results of each option, and agree a plan with you, your solicitor and your accountant. We then implement it, including valuations, share changes, trust documents and any clearances, and review it as the rules change.
Why ASWATAX
Advice is led personally by Omar Aswat, a Chartered Tax Adviser. We have helped more than 300 clients, and our work on inheritance tax has saved clients an estimated £100m+. We combine that private-client experience with business know-how, so the plan fits both.
Talk to us
Want to know what your family would face, and what you could do about it? Book a free first call. We reply the same working day.
01 · Guide in progress
The Family Business Succession Guide
How to pass on a company and fund your own retirement with the least tax and the least family friction.
Talk it through instead
Our The Family Business Succession Guide is being written. In the meantime, a 20-minute call with a Chartered Tax Adviser is free.
Book a free callWe reply the same working day.
Often handled together.
- ServiceExit PlanningTax planning in the years before you sell, including Business Asset Disposal Relief at 18% from 6 April 2026, so that more of the sale price reaches you.Read the page
- ServiceHolding CompanyWhen a holding company helps an owner-managed business, when it does not, and how it fits your plans for growth, a sale or the next generation.Read the page
- Private FamiliesFamily Investment CompanyWhere a Family Investment Company sits in your wider family plan alongside gifts, trusts, pensions and your business, and when another route is better.Read the page
- Private FamiliesTrusts and EstatesTax advice on setting up, running and winding up trusts, and on dealing with an estate after a death, led personally by a Chartered Tax Adviser.Read the page
- Private FamiliesInheritance Tax PlanningPractical inheritance tax planning led personally by a Chartered Tax Adviser: gifts, trusts, reliefs, pensions and wills, shaped around your family.Read the page
From the journal.
Questions, answered.
Straight answers to what clients ask us most. Your own situation may differ, so treat them as a starting point.
Q1What does succession planning involve for an owner-managed company?
It means deciding who will own and run the company in future, how the value passes to them, how you will be paid for stepping back, and how to keep inheritance tax, capital gains tax and family friction to a minimum. The tax is only part of it. A good plan also tests whether the next generation wants the business and how fairly it treats children who are not involved.
Q2How have the Business Relief rules changed from April 2026?
From 6 April 2026, 100% relief applies to the first £2.5 million of combined qualifying business and agricultural property per person, and 50% above that. The unused allowance can pass to a spouse or civil partner, so a couple may have up to £5 million. It had been announced as £1 million and was increased to £2.5 million in December 2025.
Q3Will my company shares qualify for Business Relief?
Only if the company is mainly trading. Shares in a company whose business mainly involves investments or dealing in land do not qualify, and excepted assets such as surplus cash or investments that are not used by the business can lose relief on their own share of the value. We test your company's activities and balance sheet, since a minor change can matter.
Q4Does Business Relief still help if I sell the company before I die?
Usually not. Relief is generally lost from the date of a binding contract for sale, so the cash proceeds are taxed in your estate. That makes the timing of a sale and any retirement plan important. If a sale is likely, the answer may be to use lifetime gifts, trusts or other planning while the shares still qualify.
Q5Can inheritance tax on business shares be paid in instalments?
Yes. From 6 April 2026 the option to pay over ten years interest-free is extended to all property that qualifies for Business Relief or Agricultural Property Relief. That can ease a cash-flow problem where an estate holds shares but little cash. It is a way to spread the cost, not a way to avoid it, so planning ahead is still better.
Q6How will pension changes from April 2027 affect a business owner?
For deaths on or after 6 April 2027, most unused pension funds and death benefits will count towards the estate for inheritance tax. Owners who treated a pension as a family wealth store should revisit that. It may be better to draw on the pension first, or use other assets for lifetime gifts, but the right order depends on income tax, too.
Q7What are freezer shares and growth shares?
They are share classes used to split today's value from future growth. Freezer shares hold the current value with a fixed entitlement and stay with the parent. Growth shares carry the future increase and go to children or a trust. The idea is to limit what is added to the parent's estate from now on. They need careful valuation and drafting.
Q8Can I turn my existing shares into freezer and growth shares?
Altering the rights of shares in a close company is treated as a disposition for inheritance tax, and cannot be a potentially exempt transfer. It can also raise capital gains questions about value shifting. For this reason, growth shares are usually newly issued at market value, not created by changing existing shares. Getting the route right matters.
Q9Should I gift shares to my children now?
It can work well, but both capital gains tax and inheritance tax need thought. A gift of shares is a disposal for capital gains, though gift holdover relief may defer the gain on shares in a trading company. For inheritance tax, a gift to an individual is usually a potentially exempt transfer, fully outside the estate after seven years if you survive.
Q10How can a trust help with succession?
A trust lets you pass value on while keeping some control over who benefits and when, which suits younger children or family members who are not suited to running the business. Gifts into a discretionary trust may be taxed on entry and at ten-year intervals, with relief if the shares qualify for Business Relief. The terms and the trustees are as important as the tax.
Q11Where does a Family Investment Company fit when I own a business?
A Family Investment Company, or FIC, is often used for the wealth that comes out of the business, such as dividends or sale proceeds, so family members can share future growth. It does not usually qualify for Business Relief when it holds investments. We can look at whether a holding company above your trading company helps feed one. Our specialist site covers the FIC detail.
Q12What if my children do not want to take over the business?
Then the plan changes from a family handover to something else: a management buy-out, a sale to an employee ownership trust, a trade sale, or keeping ownership while others run the company. Each has different tax results. It is far better to find out early than after a retirement date has been set, and children can still benefit from the value.
Q13How can I draw income from my company in retirement?
Common sources are dividends, which in 2026/27 are taxed at 10.75%, 35.75% or 39.35% after a £500 allowance, a small salary, employer pension contributions and, eventually, pension income. Leaving surplus in the company can protect Business Relief but may not suit your income needs. We model how much you need and the most tax-efficient mix.
Q14How do the nil-rate bands affect a business owner's estate?
The nil-rate band is £325,000 and the residence nil-rate band is £175,000 where a home passes to direct descendants, but the second tapers away by £1 for every £2 of estate above £2 million. Both are frozen to the end of 2030/31. For many owners the business relief allowance does most of the work, but the bands still matter for the rest of the estate.
Q15Is it better to plan succession before or after a valuation?
Before, if you can. Planning that moves value, such as new share classes or gifts, depends on the value at the time, and HMRC may check it. A professional valuation of unquoted shares can support the figures. We often recommend a valuation early, so you know what you are working with and can choose between holding, gifting and selling.
Q16How far ahead should I start planning succession?
The earlier the better, since gifts take seven years to fall out of the estate and reliefs often need ownership for a set period. Business Relief generally needs the shares to have been held for two years. If you are over 70 or in poor health, there is still planning available, but fewer routes remain. A first conversation costs nothing.
05 · Next step
Talk it through with Omar.
The first call is free. You'll speak to a Chartered Tax Adviser, and leave with a clear view of your options.
We reply the same working day.
