Does my company qualify for business property relief?

It depends on whether it is a trading company or an investment company. A trading company qualifies; a company that is mainly holding investments does not. Mixed trading and investment companies are assessed on whether the "wholly or mainly" test is met. HMRC's IHTM manual provides guidance but the analysis requires professional review of your specific business, its activities, and its balance sheet.

What is a key person insurance policy and do I need one?

Key person insurance is a life policy taken out by the company on the life of a key individual (director, founder, or key employee), with the company as the beneficiary. On the death of the insured, the company receives the payout, providing funds to recruit a replacement and cushion the impact of the loss. For estate planning purposes, key person insurance is separate from personal life insurance written in trust -- both may be appropriate for a business owner.

Can I leave my shares to my children and still use BPR?

Yes, subject to the beneficiary meeting the holding period requirements if they subsequently wish to rely on BPR themselves. Shares inherited at death acquire the deceased's ownership period for BPR purposes under s.109 IHTA 1984 -- so a beneficiary who inherits shares and then dies relatively quickly after can still benefit from BPR on those shares.

What about my partnership interest?

A partnership interest in a trading partnership qualifies for 100% BPR in the same way as sole trader assets. However, the partnership agreement may restrict or prevent the transfer of partnership interests on death. Many partnership agreements provide for the deceased's interest to be automatically purchased by the surviving partners, with the estate receiving a capital payment rather than an ongoing interest. The will should be coordinated with the partnership agreement.

Wills for Business Owners London — BPR & Succession 2026

Business property relief -- the most valuable IHT exemption

Business property relief (BPR) is a relief from inheritance tax that can reduce the taxable value of business assets by 100% or 50%, depending on the type of asset. For qualifying unquoted trading company shares and assets of a sole trader or partnership, the relief is 100% -- meaning no IHT is payable on those assets, regardless of their value.

For London business owners, BPR can be the single most significant IHT planning tool available. A founder who holds £5,000,000 of shares in a qualifying private trading company pays no IHT on those shares -- a saving of up to £2,000,000 compared to the 40% standard rate.

The key conditions are: the business must be a trading business (not mainly investment); the owner must have held the shares or assets for at least two years before death; and the business must not hold "excepted assets" -- assets not used in the business, such as excessive cash holdings or investment property.

Legal note: Business property relief is governed by ss.103-114 of the Inheritance Tax Act 1984. The 100% rate applies to unquoted shares in a trading company (s.105(1)(bb)), sole trader assets (s.105(1)(a)), and interest in a trading partnership (s.105(1)(a)). The 50% rate applies to listed shares giving control, and land or buildings used in the business but owned personally. The two-year ownership requirement is under s.106.

Shareholder agreements and articles of association

The will cannot override the articles of association or a shareholders' agreement. If the articles of a company contain pre-emption rights on death -- requiring the deceased's shares to be offered to existing shareholders at a valuation before they can pass under the will -- the executor must comply. The shares pass under the will in terms of beneficial ownership, but the articles govern what happens to the legal title.

Many shareholders' agreements contain "drag-along" or "tag-along" provisions, cross-option agreements (allowing surviving shareholders to purchase the deceased's shares, funded by key person insurance), or put and call options that activate on death. These can significantly affect the value of what actually passes under the will.

Before finalising a will, a business owner should review their shareholder's agreement and articles with their solicitor to understand what constraints apply on death and whether the will's provisions are consistent with them.

The executor problem -- who runs the business while probate proceeds

Probate for an estate containing a significant business interest typically takes 12-18 months. During that time, who runs the business? The executor has limited powers under the Administration of Estates Act 1925 -- they can carry on the business for the purpose of the beneficial winding up, but management of an ongoing trading business as if they were the owner is much more difficult.

The practical solutions are: ensuring the shareholders' agreement includes clear provisions for business continuity on death; appointing a professional executor or co-executor with relevant business experience; considering a business LPA (a power of attorney for the business as a separate entity); and ensuring that key person insurance or a life policy written in trust provides liquidity for the estate without dependence on the business.

For sole traders, the business effectively ceases on death -- the executor must wind it up or sell it as a going concern. For companies, the company continues to exist and its shares form an asset of the estate, but the deceased's personal role in the business ends immediately.

Legal note: The executor's power to carry on the deceased's business is governed by s.39 of the Administration of Estates Act 1925, which provides authority to carry on the business for the purpose of the beneficial winding up. This is not a general management power. Executors who exceed this authority may incur personal liability.

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Capital gains tax on death -- the free uplift

On death, there is no capital gains tax charge on the deceased's assets. Instead, the beneficiary acquires the assets at the market value at the date of death -- this is the "CGT-free uplift" or "base cost uplift." For a business owner holding shares with a very low original cost (common for founders) and a high current value, this uplift can save an enormous amount of CGT.

The implication for estate planning is significant: inheriting business assets is more tax-efficient than receiving them as a gift. A gift of shares during lifetime would trigger CGT (potentially at 24% for higher rate taxpayers on business assets from April 2025 onward) on the gain since acquisition. The same shares inherited on death pass at market value with no CGT charge.

This does not mean business owners should defer all transfers until death -- the IHT position, BPR availability, and the owner's own financial needs all influence the optimal strategy. But it does mean that lifetime transfers of highly appreciated business assets should be considered carefully.

Legal note: The CGT-free uplift on death is provided by s.62(1) of the Taxation of Chargeable Gains Act 1992, which treats the deceased as acquiring all assets immediately before death at their market value. This eliminates any chargeable gain up to that point. CGT rates on business assets were increased to 18%/24% (basic/higher rate) from 30 October 2024 under the Autumn Budget 2024.

Wills for London Business Owners -- common questions

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A business owner's will must address what happens to the business itself, not just the shares