Media billionaire Rupert Murdoch’s succession battle involved billions, but the dilemma was familiar: how do your children inherit your business without creating problems over ownership and control?
Most family firms will never operate on that scale. But only 74% are confident they will still be family-owned in 10 years, according to Family Business UK.
Inheritance tax (IHT) can make that transition more complicated. Your children could inherit a valuable company without having the cash available to meet the tax bill.
Passing on a business is about more than deciding who takes over. You need to consider whether the next generation is ready, how any tax bill will be funded and what the transition could mean for both your family and the company you have built.
So, if your succession plan is simply “the children will take over”, there is another question to answer: Could they actually afford to keep it?
At a glance
- Business Relief does not automatically exempt the entire value of your business from Inheritance Tax.
- A valuable business asset may not provide sufficient liquidity to meet an Inheritance Tax liability.
- Gifting shares during your lifetime may help reduce a future tax burden, but this needs to be balanced against your own financial security.
- Planning who will inherit your business, if anyone, early can provide greater flexibility and more options for you and your family.
Business Relief has changed
Business Relief can reduce the inheritance tax due when qualifying businesses are passed on. Significant changes took effect on 6 April 2026.
Under the new rules, 100% relief is generally available on up to £2.5 million of qualifying agricultural and business property. Any qualifying value above the available allowance, will generally qualify for 50% relief instead of 100% relief, resulting in an effective Inheritance Tax rate of up to 20% on those assets.
For business owners, what matters is how those rules could affect the next generation.
Your business might be worth several million pounds, but much of that value could be tied up in property, equipment, contracts or future profits.
If your children inherit the company alongside a tax bill, they need a way to fund it. Extracting cash from the business could reduce funds available for investment. Borrowing adds another financial commitment. Selling shares could dilute the family ownership you hoped to preserve.
Inheritance tax attributable to qualifying Business Relief property can now be spread over 10 equal annual interest-free instalments. That may ease the immediate pressure, but the money still has to come from somewhere.
The problem is not necessarily the size of the inheritance. The real challenge is finding the cash to meet the tax bill while keeping the business intact.
Equal isn’t always fair
Dividing a business equally between your children may feel like the fairest approach. But FamilyBusiness.org explains that fair does not always mean equal when it comes to succession. One child may have spent years helping to build the company, while another has chosen a different career.
Giving them identical stakes could create tensions over control, pay and the future direction of the business. Equally, giving one child more could cause resentment if the reasons have not been discussed openly.
Think about who should own the business, who should run it and what each child actually wants. A clear conversation now can help avoid much harder ones later.
Should you pass it on earlier?
Passing on shares during your lifetime could give the next generation more time to prepare and create opportunities for inheritance tax planning.
But timing matters. Give too much away too soon and you could compromise your own financial security. Wait too long and some planning opportunities may have disappeared.
Under HMRC’s rules, many lifetime gifts can fall outside your estate for inheritance tax purposes if you survive for seven years after making them, although different rules and tax considerations can apply to business assets.
Before transferring anything, think about what you will still need. If you rely on dividends from the company or have most of your wealth tied up in it, giving away shares could affect your own retirement.
The objective is to help the next generation prepare for the future while ensuring you remain financially secure and retain sufficient control and flexibility for your own needs.
Do your children actually want to inherit your business?
This may be the most important question in succession planning.
Your children can be proud of what you have built without wanting to run it. And even if they do, preparation matters. Deloitte’s 2026 global family business research found that only 37% were highly confident in the next generation’s preparedness to take over.
Finding out what your children want early gives everyone more choices. If one will inherit most of the company, you may decide to build more wealth outside the business for other beneficiaries. If nobody wants to take over, preparing for an eventual sale may make more sense.
It also gives the next generation time to prepare for ownership rather than suddenly inheriting responsibility for a company alongside a potential tax bill.
Get the finances right before you hand over
You cannot know exactly what your business will be worth when it eventually changes hands. But you can test whether your plans work today and under different scenarios.
What if the company doubles in value? Could other assets help meet an inheritance tax bill? What if one child wants the business and another doesn’t? How much of your wealth will you need for your own retirement?
Your accountant and solicitor can help with the tax, legal and ownership questions. A financial adviser can look at how the business fits alongside your pensions, investments and wider plans.
The goal isn’t simply to minimise inheritance tax. It’s to build a succession plan that works for you, your children and the business.
Because passing on a successful business isn’t just about whether your children can inherit it.
It’s whether they can afford to keep it.
Ready to look at whether your children could inherit your business?
If keeping your business in the family matters to you, Flying Colours Advice can help you understand how your company fits alongside your retirement plans, investments and wider family wealth.
You can arrange a conversation with an adviser here: https://fcadvice.co.uk/book-an-appointment/
Please note:
This article is for general information only and does not constitute advice. The information is aimed at retail clients only.
All information is correct at the time of writing and is subject to change in the future.
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The Financial Conduct Authority does not regulate estate planning, tax planning, trusts, or Will writing. Note that life insurance plans typically have no cash in value at any time and cover will cease at the end of the term. If premiums stop, then cover will lapse. Cover is subject to terms and conditions and may have exclusions. Definitions of illnesses vary from product provider and will be explained within the policy documentation.
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