Planning for Company Trading Shares in Trust: What Business Owners Need to Know After the Reduction in BPR
For many business owners, the company is not just a source of income, it’s the cornerstone of family wealth. Historically, Business Property Relief (‘BPR’) has been one of the most powerful tools for passing on trading company shares free of Inheritance Tax (‘IHT’). But with the recent reduction in BPR taking effect from 6 April 2026, the landscape has shifted. Planning that once felt optional is now essential.
This article explores why placing trading shares into trust remains a compelling strategy, how the new BPR rules affect planning, and what business owners should be doing now to protect the long‑term value of their company for future generations.
Why Consider Putting Trading Shares in to Trust?
Trusts have long been used by business owners to secure control, protect assets, and manage succession. Even with reduced BPR, they continue to offer several advantages:
- Control with protection — You can pass value to the next generation while retaining influence over how shares are managed or voted.
- Ring‑fencing family wealth — Trusts protect shares from divorce, creditors, or poor financial decisions by beneficiaries.
- Future tax efficiency — Once shares are in trust, future growth sits outside your estate, reducing the long‑term IHT burden.
- Succession planning — Trusts create a structured, stable framework for transitioning ownership without destabilising the business.
For many families, the question is no longer whether to use a trust, but when.
The New BPR Landscape: What Has Changed?
The Government’s reforms to Business Property Relief, taking effect from 6 April 2026, represent the most significant shift in decades. A new £2.5 million allowance now caps the value of business and agricultural assets that can receive 100% BPR, with any qualifying value above this threshold receiving only 50% relief, meaning an effective 20% IHT charge on the excess.
This allowance is transferable between spouses and civil partners, allowing up to £5 million of qualifying assets to benefit from full relief on second death. The changes also reduce relief for certain share types, particularly AIM and other “not listed” shares, which will now only qualify for 50% relief. These reforms tighten the regime considerably, making early planning, valuation, and structuring more important than ever for business owners.
The bottom line: BPR is still available, but it is no longer the blanket protection it once was. Planning early is now critical.
Why Trust Planning Still Works – Even With Reduced BPR
Even with reduced relief, gifting trading shares into trust can still be highly tax‑efficient. Here’s why:
- You Can Lock In Relief While It Still Applies
If the company qualifies for BPR today, gifting shares into trust can secure relief on the transfer, even if the company’s activities change in the future.
- Future Growth Escapes IHT
Once shares are in trust, all future increases in value sit outside your estate. For fast‑growing businesses, this can save millions in future IHT.
- Trusts Allow Staged Succession
You can pass value without giving up control. Trustees can hold shares, vote them, and manage distributions in line with your wishes.
Key Considerations When Gifting Shares Into Trust
- Valuation and Affordability
A professional valuation is essential. With reduced BPR, the potential IHT charge on entry into trust may be higher, so planning the size and timing of gifts is crucial.
- Trading Status Review
A detailed review of the company’s activities, subsidiaries, and balance sheet is now more important than ever to confirm BPR eligibility.
- Use of Multiple Trusts
Creating a series of trusts can help maximise available nil‑rate bands and manage exposure to entry charges.
- Interaction With Family Investment Companies (FICs)
For some clients, a hybrid approach; trusts holding shares in a FIC, can combine control, tax efficiency, and long‑term protection.
- Governance and Succession
Trusts should be paired with shareholder agreements, voting arrangements, and a clear succession plan to avoid future disputes.
A Practical Example
An unmarried business owner with a trading company worth £5m previously relied on 100% BPR to pass shares free of IHT.
Under the new rules, 50% of the value is now exposed to IHT, triggering a potential liability of £500,000 (ignoring tax free allowances), and gifting all of the shares into trust now triggers a potential IHT charge on the non‑relieved portion.
Gifting £2.5m into trust and surviving seven years could mitigate this liability as a whole (based on a very simple scenario and assuming no growth to the shares held personally).
Once in trust:
- future growth is outside the estate
- the shares remain protected
- the family retains long‑term control
- the trust can distribute value tax‑efficiently to family generations
- The allowance resets for the individual after seven years.
Even with an upfront cost, the long‑term savings can be substantial.
Conclusion: Act Early, Review Regularly
The reduction in BPR marks a significant shift for business owners. But it also creates an opportunity: those who plan early can still secure meaningful tax advantages and protect their company for future generations.
Placing trading shares into trust remains one of the most effective strategies for:
- reducing long‑term IHT
- protecting family wealth
- managing succession
- preserving control
With the rules now tighter and relief less generous, proactive planning is essential. Please contact Trusted Tax Advice if you’d like to understand if your business qualifies for the relief, or indeed if you were considering adding company shares into trust.
