The business had been in the family for twenty-six years. Nobody had ever sat down and discussed what happened next.
The Scenario
The father founded the business in 1998. It is a specialist logistics and distribution company operating across south-west London and Surrey, with contracts across retail, food service, and construction supply. Over twenty-six years it has grown from a one-van operation to a company with sixty-eight employees, a small fleet, and an annual turnover approaching £9 million. He owns 100 per cent of the shares. He is sixty-three years old.
His wife holds three residential investment properties in her name, acquired over the years from income the business generated. She has never been involved in the business operationally, but the properties represent a significant part of the family’s wealth, and she has her own views about what the future should look like.
Their son, thirty-four, has worked in the business for nine years and currently runs the operational side. He is capable, trusted by the staff, and wants to take the business on. Their daughter, thirty-one, works in the legal sector and has no interest in joining the business, but she is aware that her brother will eventually inherit a significant asset, and has a view about fairness that has never been explicitly aired.
Nobody in this family had sat down together and discussed what the plan was. The father had been meaning to get to it. The urgency had never quite arrived. Then the April 2026 changes to Business Property Relief made the conversation overdue.
At a Glance
- Family profile: Richmond family business; father (63) sole shareholder of trading company; wife holds investment property portfolio; son (34) active in business; daughter (31) in separate career
- Situation: No succession plan in place; April 2026 BPR changes affect IHT exposure; pension IHT changes relevant from 2027
- Core issue: Business and property assets concentrated with no structure; son and daughter have different expectations; mother’s portfolio has its own IHT and CGT profile
- Cause: Succession repeatedly deferred; no family governance framework; advisers previously engaged for annual compliance only
Resolution: Full family wealth mapping, business valuation, BPR position assessed under revised 2026 rules, phased share transfer, property ownership and family investment company options reviewed
Outcome: Phased share transfer to son commenced; family investment company under active consideration for property portfolio; wills and letters of wishes updated; daughter’s position addressed through separate asset plan
Why succession planning is always urgent and rarely treated as such
Most family business owners know they should have a succession plan. Most do not have one. The gap between awareness and action is not usually explained by indifference. It is explained by the combination of emotional difficulty, operational demand, and the absence of a concrete deadline. Succession planning requires a conversation about mortality, about fairness between children, about what the business is actually worth and to whom, and about how much control the founder is willing to relinquish and when. None of those conversations are comfortable, and the business provides a daily reason to postpone them.
The April 2026 changes to Business Property Relief changed the calculation for many families.
Under the previous rules, qualifying business assets held by an individual attracted 100 per cent BPR, removing them from the estate for Inheritance Tax purposes entirely. The new rules introduced from 6 April 2026 are materially different:
- The first £2.5 million of qualifying business and agricultural property still attracts 100 per cent relief.
- Above £2.5 million, relief is restricted to 50 per cent, with the remaining value potentially subject to IHT at 40 per cent.
- Any unused portion of the £2.5 million allowance can be transferred to a surviving spouse or civil partner.
- From April 2027, unused pension funds will also form part of the deceased’s estate for IHT purposes, changing the picture for anyone who has used pension savings as part of a tax-efficient extraction strategy.
Although the revised £2.5 million allowance is more generous than the original £1 million proposal, it does not remove the need for planning where business value exceeds that threshold. The pension changes add a further dimension, and for families with both business assets and property, the interaction of multiple reliefs and multiple estates still requires careful modelling.
The article Key Factors Affecting Richmond Businesses and Taxpayers in 2026 addresses both sets of changes in the wider fiscal context. This case study shows what they mean when applied to a specific family with specific assets and relationships.
Why family business succession is more complex than business succession
A straightforward business succession involves one business, one or more successors, and a negotiated transfer of ownership and management. It is commercially complex but structurally contained. A family business succession involves all of that, plus the relationships, expectations, and long-standing equities of a family unit that has been shaped by the business for a generation. The two things are not easily separated, and attempting to treat them as if they were usually produces a plan that is technically sound and humanly inadequate.
The specific tensions in this case were recognisable.
The father’s instinct was to pass the business to the person best placed to continue it, which was his son. His wife’s instinct was to ensure fairness between the children, which in her mind meant either an equal share or an equivalent allocation of other assets. The son wanted to take the business on fully, without the complication of a co-owner who was not involved in it. The daughter’s position had not been explicitly stated, but the parents were aware of an unspoken expectation that had never been addressed.
Underneath all of that sat a business that had not been formally valued, a property portfolio that had not been reviewed in several years, and pension funds that were about to become relevant to the estate calculation in a way they had not previously been. The family had significant assets and no coherent plan for any of them.
“We encounter this configuration regularly. A successful founder, a business that has not been planned around, children with different relationships to it, and a spouse who holds the emotional centre of gravity while having her own financial interests that are not always aligned with the others. The first meeting is diagnostic rather than advisory. We need to understand the family before we can help the family.”
Mapping the family’s position
The first piece of work was a comprehensive mapping of the family’s assets, their current tax treatment, and their estimated IHT exposure under the April 2026 rules. This required bringing together information from four separate positions.
The IHT exposure calculation, based on these asset values and the revised BPR rules, produced the following picture before nil-rate bands are applied. Nil-rate bands, currently £325,000 per person, and the residence nil-rate band of £175,000 where applicable, are transferable between spouses and will materially reduce these figures once modelled in full:
Neither parent had looked at the numbers in these terms before. The father had assumed the business would pass largely free of IHT under the pre-2026 rules. The mother had not connected her property holdings to a specific IHT exposure figure. Even with the more generous £2.5 million BPR allowance, the family’s combined position still contained planning gaps that merited attention, particularly once the pension changes, the property portfolio, and the unresolved succession questions were considered together.
The gap between what the family had assumed and what the analysis showed was the starting point for everything that followed.
What the process involved
The advisory work was structured across five areas, each requiring coordination between our tax planning team, the family’s solicitor, and a financial adviser for the pension-related questions.
Business valuation. A formal earnings-based valuation was commissioned to establish a defensible market value for the shares. The valuation came in at £3.15 million, consistent with the initial estimate. This figure was needed for the IHT planning, for the share transfer mechanics, and for the eventual shareholder agreement between father and son.
BPR position under the revised rules. With the first £2.5 million of business value attracting full relief, the remaining £650,000 carried 50 per cent exposure, producing a chargeable amount of £325,000. Nil-rate bands available to the father’s estate will reduce or eliminate this further once modelled in full, but the position still required active planning rather than assumption.
Phased share transfer to the son. A five-year transfer plan was structured, using holdover relief under TCGA 1992 s.165 to defer the capital gains that would otherwise arise on each gift. Each annual transfer was sized to make meaningful progress against the estate exposure while staying within what the father was willing to relinquish operationally at each stage. Lifetime gifts of qualifying business property can still be highly effective, but the treatment depends on the donor surviving seven years, the qualifying status of the business property at that time, and the recipient’s continued ownership position. This was modelled carefully before any transfer was made. A shareholder agreement was drafted simultaneously, setting out governance arrangements during the transition period and a mechanism for the son to acquire the remaining shares on agreed terms at the conclusion of the programme.
The daughter’s position. The parents’ wills were reviewed together. The mother’s will and accompanying letter of wishes addressed the intended treatment of the property portfolio, setting out the parents’ intention that the daughter should be provided for through the property assets, alongside the necessary will updates to give legal effect to the plan. The father’s will reflected the revised business share position and the overall family intentions. The letter of wishes was not legally binding, but it gave both children a clear articulation of the parents’ intentions and removed the ambiguity that had been generating low-level anxiety on both sides.
The property portfolio. The mother’s three investment properties were reviewed for both IHT and ongoing yield efficiency. A family investment company structure was modelled as a potential holding vehicle, which would allow the properties to be held by a company in which family members hold shares, giving greater flexibility over how income and capital are distributed. An FIC should not be treated as an automatic property tax solution. The SDLT, CGT, mortgage, refinancing, governance, and long-term succession implications all need modelling before existing property is transferred. The FIC option was not immediately implemented for those reasons, and a decision was expected in the following financial year once the full modelling was complete. It remained under active consideration.
Pension drawdown strategy. The pension adviser reviewed the father’s pension funds in light of the April 2027 changes and proposed a revised drawdown strategy to reduce the fund size before the IHT inclusion date. Any increased drawdown also needed to be modelled against the father’s income tax position, because reducing an eventual IHT exposure by triggering unnecessary higher or additional rate income tax would not automatically improve the family’s net position. The two calculations were run in parallel.
What the conversations revealed that the numbers could not
Succession planning of this kind is not purely a technical exercise. The tax analysis and the legal structures matter, but they sit on top of a set of human decisions that the numbers cannot make for you.
Three things emerged from the family conversations that had not been visible in the initial briefing.
The first was the father’s ambivalence about timing. He wanted to transfer the business to his son, but he also wanted to remain involved, and the shape of that involvement had not been defined. A clear framework, agreed between father and son and reflected in the shareholder agreement, gave both of them a language for that transition that was professional rather than familial, and therefore more likely to hold when the pressure was on.
The second was the daughter’s actual position, which was more nuanced than the parents had assumed. She did not want a share in the business. She did want to know that the family’s planning had taken her into account, and that her brother’s inheritance of a significant asset was matched by a clear intention in her direction. The letter of wishes, alongside the updated wills, addressed this directly. The relief it produced on both sides was disproportionate to the simplicity of the documents.
The third was the mother’s concern about the properties. She had built the portfolio over many years and regarded it as her own financial contribution to the family’s security. She was not comfortable with a plan that treated the properties purely as an IHT mitigation vehicle. Understanding that concern changed how the FIC conversation was framed, from a tax efficiency exercise to a structure that would give her ongoing oversight and income while providing a more tax-efficient vehicle for the next generation.
“The families who handle succession well are not the ones with the most sophisticated structures. They are the ones who have the conversations that other families avoid. The structures follow from the conversations, not the other way around. In our experience, the planning that lasts is the planning that the family has actually agreed to.”
Where things stood six months in
Six months after the initial meetings, the position was as follows:
- The first tranche of shares had been transferred to the son under holdover relief, reducing the father’s shareholding from 100 per cent to 84 per cent.
- A shareholder agreement was in place, setting out governance arrangements for the transition period and the mechanism for the son’s future acquisition of the remaining shares.
- Both parents’ wills had been updated, reflecting the revised asset positions and incorporating letters of wishes in relation to the daughter.
- The mother’s property portfolio had been reviewed for yield and Section 24 efficiency; one property was remortgaged onto a better rate and a rental review had been initiated on two of the three.
- The family investment company structure remained under consideration, with a decision expected in the following financial year once the entry costs and tax implications were fully modelled.
- The pension adviser had reviewed the father’s pension funds in light of the April 2027 changes, running both the IHT exposure and the income tax cost of drawdown in parallel before recommending a revised strategy.
None of that had existed six months earlier. The family had moved from an unplanned position with a material and growing IHT exposure to a structured programme that addressed the business, the properties, and the relationships in a coordinated way.
The article Why 2026 Feels Harder Than It Should for Richmond Businesses addresses the wider pressures bearing on owner-managed businesses in the current environment. Succession planning does not sit apart from those pressures. It is shaped by them, and in many cases it is the work that insulates a family business from them most effectively.
Frequently asked questions
What is Business Property Relief and how has it changed from April 2026?
Business Property Relief (BPR) is a relief from Inheritance Tax that applies to qualifying business assets. From 6 April 2026, the first £2.5 million of qualifying business and agricultural property attracts 100 per cent relief. Above that allowance, relief is generally restricted to 50 per cent, with the remaining value potentially subject to IHT at 40 per cent. Any unused portion of the £2.5 million allowance can be transferred to a surviving spouse or civil partner. The change affects all individual shareholders in qualifying trading companies.
What qualifies for Business Property Relief?
BPR applies to interests in unquoted trading companies, sole trader businesses, and interests in trading partnerships. The business must have been owned for at least two years at the date of death or gift. Investment businesses, including companies whose primary activity is holding property for investment, do not qualify. The boundary between trading and investment can be complex in practice, particularly for businesses with a significant property element alongside a trading activity.
Can I transfer business shares to my children during my lifetime to reduce IHT?
Lifetime gifts of qualifying business property can still be highly effective, but the treatment depends on several conditions: the donor must survive seven years from the date of the gift, the business property must retain its qualifying status, and the recipient’s continued ownership position is also relevant where replacement property rules apply. The post-2026 BPR allowance also affects failed lifetime transfers. This needs careful modelling before any share transfer is made.
What is holdover relief and when does it apply to a business transfer?
Holdover relief allows the capital gain that arises on a gift of qualifying business assets to be deferred rather than charged immediately. The gain is effectively transferred to the recipient, who is treated as having acquired the asset at the donor’s original base cost. When the recipient eventually disposes of the asset, the held-over gain comes into charge alongside any further growth in value. Holdover relief is available on gifts of shares in unquoted trading companies and requires a joint election by both the donor and the recipient.
What is a family investment company and is it suitable for holding property?
A family investment company is a private limited company through which family members hold shares, typically structured so that parents hold growth-restricted shares while children hold ordinary shares that participate in future growth. For property, an FIC can offer flexibility around income distribution and long-term succession planning. However, an FIC should not be treated as an automatic property tax solution. The SDLT, CGT, mortgage availability, refinancing, governance and long-term succession implications all need modelling before existing property is transferred. Professional advice is essential before proceeding.
How does pension IHT work under the changes taking effect in April 2027?
From April 2027, unused pension funds remaining at death will be included in the deceased’s estate for IHT purposes. The change means that individuals with large pension pots who do not draw them down will see those funds subject to IHT in the normal way. The practical response for some is to draw down pension income more actively during retirement, reducing the fund size before the IHT inclusion date. However, increased drawdown must also be modelled against the individual’s income tax position, because unnecessary withdrawals at higher or additional rate can create an income tax cost that offsets some or all of the IHT saving.
What is a letter of wishes and is it legally binding?
A letter of wishes is a document that accompanies a will and sets out the deceased’s intentions in relation to assets or beneficiaries. It is not legally binding on the executors or on the beneficiaries, but it provides a clear statement of intention that can guide decisions and, in a family context, can remove the ambiguity that otherwise tends to generate conflict. A letter of wishes alone cannot direct the legal transfer of assets. It works alongside, not instead of, properly drafted wills.
What is a shareholder agreement and why does a family business need one?
A shareholder agreement is a contract between the shareholders of a company that governs how the company is managed and how the shares can be transferred. In a family business succession context, it typically covers reserved matters requiring the founder’s consent during the transition period, the mechanism by which the successor acquires the remaining shares, what happens to shares if a shareholder dies or becomes incapacitated, and how disputes between shareholders are resolved. It provides a professional framework for a relationship that might otherwise be managed informally.
If this feels familiar
If you own a business and have been meaning to get to the succession conversation, the April 2026 BPR changes and the pension IHT changes coming in 2027 together make the timing of that conversation more important. The question of what happens to the business, to the other assets, and to the relationships between the people who matter deserves a structured conversation, not a deferred one.
Our team in Richmond works with family businesses across south-west London on the planning that sits at the intersection of tax, structure, and the human decisions that the numbers cannot make on their own. If you would like to start that conversation, we are ready to have it.
About the author
Donovan Crutchfield, Area Managing Partner, Xeinadin Richmond
LinkedIn: Donovan Crutchfield | LinkedIn
Donovan works with owner-managed businesses and private individuals across Richmond-upon-Thames and the wider South West London catchment. His practice includes a significant number of family businesses navigating the succession, IHT, and ownership structure planning that comes with a change of generation.
This case study is based on composite client experience and does not represent any single individual or family. All identifying details have been changed. The information provided is for general guidance only and should not be treated as a substitute for professional tax, legal, or financial advice specific to your circumstances. The BPR figures reflect published GOV.UK guidance as at May 2026 and should be verified by a qualified adviser before any planning decision is made.
