Business Succession & Estate Planning For Business Owners

What does succession planning for business owners look like?

Business owners, whether that be of private limited companies, sole traders, or partnerships, need to give careful consideration as to how their share in their business passes when they die.

The best way to do this is with a valid Will. Laying out your business succession plan via a Will leaves fewer ambiguities, and prevents those assets from being distributed according to the rules of intestacy, which may not reflect your wishes. 

Whilst succession will be an obvious consideration, business owners should also be aware of tax reliefs that may be available to them when estate planning – mitigating tax consequences in the event of their death. 

What are some common business succession plans?

When considering your business succession plan, there are generally two approaches that business owners can take: 

• The business assets pass directly to a beneficiary, which is common with family businesses
• Assets are sold, with the proceeds of that sale going to the beneficiary (without the burden of the business itself)

Consideration should also be given as to whether or not equity would be achieved by gifting business assets.

In order to make the administration of your business estate as smooth as possible, you should lay out a clear plan for this transfer of ownership and/or management. It’s also important to consider any shares that are currently held in the business, and what happens to these upon your death. 

You should also ensure that you consider the potential tax consequences for the recipient of any gift in your succession planning. If you’re unsure how best to proceed with this, speak to our experienced Wills team, who can guide you through the process. 

What tax reliefs can be factored into a business estate plan?

When it comes to business succession and estate planning, navigating the tax landscape can feel overwhelming. For those involved in the farming sector, estate planning in business often hinges on two vital mechanisms: Agricultural Property Relief (APR) and Business Property Relief (BPR).

If you are currently building a business succession plan, here’s a breakdown of how these reliefs work, what they cover, and who qualifies.

Agricultural Property Relief (APR)

APR is designed to protect agricultural businesses from being broken up to pay Inheritance Tax. This relief is a powerful tool for lifetime planning – it can be applied to assets gifted during your lifetime, not just upon death.

APR generally applies to the agricultural value of qualifying property. Any value attributable to development potential or non-agricultural use may not qualify.

What it entails

APR can reduce the taxable value of agricultural property by either 50% or 100%, helping to reduce the inheritance tax burden on succession.

Who and what is eligible?

In the context of succession planning for business owners, the term “agricultural property” is quite broad. It includes:

• Land and Buildings: Land used for growing crops, land managed under crop rotation or the Habitat Scheme, and land used for short-rotation coppice (trees harvested at least every 10 years)
• Property Structures: Farmhouses, cottages, and farm buildings that are proportionate in size to the agricultural land being farmed
• Specialist Operations: Stud farms used for breeding and rearing horses
• Intangible Assets: The value of milk quotas associated with the land, as well as certain agricultural shares and securities

What is Excluded?

APR does not cover farm equipment and machinery, livestock, harvested crops, derelict buildings, or any property that is already subject to a binding contract for sale.

Business Property Relief (BPR)

What happens if an asset fails to qualify for APR, or if your company has nothing to do with farming (for instance, you run a car parts manufacturing business)? This is where Business Property Relief (BPR) comes into play. Like APR, BPR can be utilized for both lifetime gifting and estate distribution upon death.

What it entails

BPR reduces the value of a business or its assets for Inheritance Tax purposes. Depending on how the asset is held, the relief is available at either 100% or 50%.

Who and what is eligible?

You may qualify for 100% relief on:

• A business or an interest in a business (such as being a sole trader or a partner in a partnership).
• Shares in an unlisted company (including AIM-listed companies).

You may qualify for 50% relief on:

• Shares controlling more than 50% of the voting rights in a listed company.
• Land, buildings, or machinery owned by the business owner but used by a business they controlled or were a partner in.
• Land, buildings, or machinery held in a trust that the business had the benefit of using.

Key considerations for APR and BPR

To ensure that your business succession plan is airtight, it’s worth considering the following rules that govern these two forms of tax relief: 

1. No double-dipping: If an asset qualifies for APR, you cannot also claim for BPR on that exact asset
2. Two-year rule:  In most cases, the business property must have been owned for at least two years before the transfer or death. Additional conditions also apply, including requirements regarding the nature of the business and the use of the asset
3. Future use: Relief may be restricted or denied where an asset is not used mainly for business purposes, or where it is treated as an excepted asset that is not required for the future needs of the business

From 6 April 2026, changes introduced by HMRC limit the availability of 100% APR and BPR by applying a combined £2.5 million allowance to qualifying agricultural and business property. Different relief rates may apply above this threshold.

To give a clearer idea of how this all works in practice, let’s look at two examples that business owners may encounter: 

Example A: Sole trader with no Will

Maria runs a successful bakery as a sole trader. She assumes her daughter will automatically inherit the business. However, she dies without a Will, and the business passes under the intestacy rules, meaning her estranged husband receives the majority share. 

The daughter has no legal authority to run the bakery, causing the business to collapse. A simple Will could have prevented this outcome.

Example B: Director restricted by company articles

James owns 40% of a private limited company. His Will states that his wife should receive his shares, but the company’s Articles of Association require other shareholders to buy the shares first. 

His wife is surprised to receive a lump‑sum payment instead of ownership. If James had reviewed his Will alongside the company documents, he could have aligned the outcome with his intentions.

Frequently Asked Questions

Why is estate planning important for business owners?

Estate planning ensures that your business interests pass smoothly and according to your wishes; avoiding disputes, mitigating tax liabilities, and helping to maintain business continuity after your death.

What happens to my business if I die without a Will?

If you die intestate, your business assets will pass according to strict intestacy rules, which may not reflect your wishes and could create complications for partners, shareholders, or family members.

Can I leave my business to someone who isn’t involved in it?

Yes, but you should consider whether they can manage the business or whether it would be more appropriate to instruct that the business be sold and the proceeds passed to them.

Do partnership agreements or company documents override my Will?

In some cases, yes. Partnership agreements, shareholder agreements, and Articles of Association may set out what happens to shares or interests in a business on death and could override your Will, if not aligned.

Helping business owners with estate planning

Don’t leave your estate planning to somebody else. We can advise what tax reliefs may be available to you, and help to structure your succession plan in a way that benefits everybody involved.