Entering the 2026/27 tax year, the "family business handover" has officially become a luxury. From the end of uncapped BPR to the final climb of BADR, the Treasury has placed a significant toll booth on business succession. Here’s why the "math of retirement" just changed for your clients and why your April reviews need to move from compliance to damage control.
If you spent the Easter break thinking the worst was over now that MTD for ITSA is finally out of the gate, I have some sobering news. We’ve just entered the tax year where “succession” officially became a luxury.
The UK’s mid-market has always relied on the “handover.” You build it, you sweat for thirty years, and then you pass the keys to the kids or sell up for a quiet life in the Cotswolds. But as of this month, the Treasury has effectively put a toll booth on that transition.
Let’s talk about Business Asset Disposal Relief (BADR). We used to call it Entrepreneurs’ Relief, back when the government actually wanted to sound like it liked entrepreneurs.
As of April 6, 2026, the rate has officially climbed to 18% (up from 14% last year and the “golden” 10% we all remember).
The Damage: If your client sells a business for its first £1m of qualifying gain, they are now handing over £180,000 to HMRC.
The Source: You can see the official ramp-up schedule on the GOV.UK BADR guidance.
The Reality: That’s an £80,000 “succession tax” increase in just two years. For a retiring plumber or a boutique agency owner, that’s not just “tax” that’s their first three years of retirement income gone.
This is the one that’s going to break hearts in the boardrooms of family firms. The unlimited 100% relief for Business Property Relief (BPR) is dead.
We now have a £2.5m combined cap for BPR and Agricultural Property Relief (APR). Anything over that is hit with a 20% effective IHT rate (via a 50% relief reduction).
The Math: If a couple owns a manufacturing plant worth £10m, they can combine their allowances to cover £5m. The other £5m? That’s a £1m tax bill due when the second parent passes away.
The Source: Check the ATT Technical Update on how this new “relief allowance” interacts with lifetime gifting.
The Impact: We’re already seeing Jo Bamford, heir to the JCB fortune lobbying hard, warning that this could force family firms to sell to Private Equity just to settle the bill.
And just to make sure no one stays in the game too long, dividend tax rates have also been nudged up this year to close the gap between salary and dividends. The basic rate is now 10.75% and the higher rate is 35.75%
The Source: The Finance Act 2026 breaks down how these % jumps are quietly eroding the incentive for business owners to take a “draw-down” income rather than exiting entirely.
We can’t change the law, but we can change the structure. This month, your “to-do” list needs to look like this:
Spousal Transfers are Mandatory: If one partner holds all the shares in a £5m business, you are wasting £2.5m of relief. Get those shares moved now.
The “Seven-Year Itch”: While the £2.5m cap is an absolute limit on death, the underlying planning for Potentially Exempt Transfers (PETs) is back in fashion. Gifting assets early doesn’t “reset” the cap, but it does start the clock to move value out of the estate entirely after seven years.
Insurance is the New Tax Plan: For asset-rich, cash-poor businesses, a “Whole of Life” policy written into trust is no longer a niche product. It’s the only way to ensure the business stays in the family when the taxman comes knocking.
The era of “accidental succession” is over. If your clients don’t have a formal, tax-mitigated exit plan by the end of this year, they aren’t just leaving a business to their kids, they’re leaving them a debt to the Treasury.
