Business valuations have always been a core element of effective succession planning. As Inheritance Tax (IHT) rules evolve and Business Property Relief (BPR) is set for significant change from the 6th of April 2026, the need for well-supported and up-to-date valuations has increased. Owners now face a more complex planning landscape in which understanding the composition of value, and how it interacts with reliefs, is essential.
Understanding BPR rules for succession planning
Under the existing rules, BPR provides 100% relief on all qualifying business assets, allowing business owners to transfer these assets free from IHT. However, as announced during the UK Government 2024 budget, from the 6th of April 2026, only the first £1 million of qualifying business property will receive 100% relief, with any excess above this threshold receiving 50% relief. For many owners this will introduce an IHT exposure where none existed before at an effective IHT rate of 20%.
Benefits of professional valuations
This is precisely where professional valuations add clarity. They help owners understand the current value of their shareholdings and how this compares with the new BPR thresholds. For example, where an individual’s shareholdings are expected to exceed £1 million, a planned gift of shares may reduce the holding to a level below this threshold, thereby eliminating any IHT exposure held by these shares, provided the donor survives the requisite seven-year period. However, this requires careful analysis of both present value and expected future growth. A valuation that identifies the key drivers of value can help assess whether future increases in enterprise value may cause the shareholding to exceed the £1m BPR allowance leaving an IHT liability.
Supporting strategic decisions
We offer independent business valuations suitable for HMRC, legal, and share restructuring purposes. These support discussions around the allocation of value between trading and non-trading components, which is relevant if HMRC scrutinises the company’s qualification for relief. For businesses with investment assets, surplus cash or non-core property, understanding how much of the value qualifies for BPR is crucial, particularly when new thresholds apply. A well-evidenced valuation can guide decisions about restructuring, extraction of surplus assets or strategic reinvestment to strengthen the trading profile before succession.
Alongside the tax considerations, valuations provide an independent commercial perspective for owners looking to transfer shares to family, management, or trusts. They offer a clear basis for determining appropriate gift levels, support shareholder agreement updates and help ensure fairness between beneficiaries. They also highlight opportunities to improve performance or reduce risk ahead of a planned transfer, which can be especially beneficial in periods of economic change.
Advisory-led succession planning
In advisory-led succession planning, the process typically begins by identifying a successor, whether from within the family or management team. Valuations then inform the structuring of a succession buyout, establishing the price the successor will pay, how the buyout is financed, and how value is preserved for the outgoing owner. This aligns with the practical services offered by specialist advisors, like PEM CF, who combine valuation expertise with planning, financing, and transaction execution.
As the 2026 BPR reforms approach, it’s essential for business owners to understand their business’s value and how it aligns with the new thresholds. This clarity enables a succession plan that protects value and gives business owners confidence through the reforms.
Our Corporate Finance and Private Client teams collaborate to support our clients through every stage of their journey. If you have concerns about the upcoming reforms do reach out to our team for personalised advice, your future is our focus.
