How the right tax and financial planning can protect your legacy for the next generation
With nine months to go before the next major Inheritance Tax change, you could be forgiven for believing there’s plenty of time for planning to begin.
However, the reforms could be hugely impactful for entrepreneurs and business owners and that means effective tax planning is essential… now.
At MHA in Edinburgh, our tax team has seen increasing concerns from clients about the IHT changes announced in the Autumn Budget in October 2024… how can they best handle the impact of the changes, and what tax planning is needed before April 2026.
Changes to pensions will impact many owner-managed and family-run businesses. You will also be affected if you are retired, are succession planning, use trusts, draw dividend income, or have unused pensions.
In this article, we highlight common concerns raised about the reforms, and how these can be addressed with the right tax and wealth planning to ensure the legacy you’ve worked hard to build is protected for the next generation.
What was announced?
Key reforms to IHT were announced in the Autumn Budget 2024:
- Changes to Agricultural Relief (AR) and Business Relief (BR).
- Inclusion of unused pensions within the scope of Inheritance Tax.
What’s changing and when?
- April 2025: Capital Gains Tax (CGT) – the rate of CGT that applies to Business Asset Disposal Relief increased to 14% in April 2025 and will rise again to 18% in April 2026.
- April 2026: Combined Assets – from April 2026, the first £1m of combined business and agricultural assets will continue to attract no inheritance tax at all, but for assets over £1m, inheritance tax may apply with 50% relief, at an effective rate of 20%.
- April 2027: Pensions, AR & BR – unused pensions are expected to be subject to Inheritance Tax. Inherited pensions will likely be brought into IHT from April 2027, along with reforms to Agricultural Relief and Business Relief.
Who will be affected?
- OMB and family-owned businesses
- Individuals with trust arrangements in place
- Individuals with significant dividend income
- Individuals who are retired or close to retirement
Key points to consider
- For all but the smallest businesses, doing nothing is likely to waste potential savings.
- Any transfer of shares will require a robust valuation including consideration of minority interest discounts.
- Strong consideration should be given to insuring potential liabilities.
- Any planning needs to be cognisant of wider commercial and family factors and should involve a financial planner.
Euan Fernie, partner at MHA, recognises what a critical time this is for businesses to review their current situation and prepare for the changes coming.
Euan, who is based the firm’s St Colme Street, Edinburgh, office, said: “These changes present both challenges and opportunities for business owners and families looking to secure their financial future.
“Early planning is key, particularly when it comes to succession and inheritance strategies, as well as pension provisions. With the right approach, individuals can protect their wealth and ensure the legacy they’ve built continues to benefit the next generation.”
Adrian Johnston, Tax Manager at MHA said: “It is now crucial that those people impacted by the changes consider taking action before April 2026. Draft legislation was published on the 21 July 2025 which confirms no material changes to the Autumn budget announcements.”
For FAQs and more information on IHT planning for businesses, go to: www.mha.co.uk/insights or call MHA in Edinburgh on 0131 225 4681.
