Saving up to £8m Inheritance Tax in Owner-Manager Succession

For the founders of a £12 million manufacturing business, success is only real if the value created can be protected and passed on efficiently to the next generation. Our challenge was to create a strategy to protect this wealth, leaving the founders with control and the right level of access to funds, but transferring value without losing Inheritance Tax on the way. If the client realises their £35 million vision for growth and sells at that value, that is an Inheritance Tax saving of up to £8 million.

At a glance

• Projected Inheritance Tax saving: up to £8 million, assuming growth from £12 million to £35 million and sale at that value
• Sale expected within ten years; succession completed over approximately five to seven years
• Control retained by the founder throughout, with flexibility retained over access to assets and funds
• Saving measured against the position under the Inheritance Tax rules in force from April 2026

The client’s position

The founder owns an owner-managed business valued at approximately £12 million, and intends to sell within ten years and to hand the business on to the next generation beforehand. His wife is a shareholder but is not involved in running the company.

The Inheritance Tax rules from April 2026

Since 6 April 2026, 100% business property relief has applied to only the first £2.5 million of qualifying business property for each individual, with any unused allowance transferable between spouses. Value above that receives 50% relief, an effective Inheritance Tax rate of 20%, and relief is lost once a binding contract for sale is entered into. On a business of this size, a transfer on death would give rise to a significant liability, and a sale would leave the proceeds fully exposed in the couple’s estate.

What the founders wanted to achieve

The founder and his wife wanted to:

• protect the value of the business and their wider wealth from Inheritance Tax;
• position the business for sale as efficiently as possible;
• ensure funds are available for personal, family and reinvestment needs, held in appropriately protected vehicles;
• allow succession to proceed at a pace the family controls; and
• keep control of the business and access to their assets.

These aims pull against one another: greater tax protection generally means giving up some access or control.

How the strategy was developed

We reviewed a range of potential strategies, each with its own advantages and disadvantages for tax protection, access to assets, control, complexity and cost. We then selected a number of strategies that together gave the founder the right combination of Inheritance Tax protection, access to his assets and control.

The result is a phased plan built around a family trust and a Family Investment Company, supported by a tax-efficient will structure. It separates the economic value of the business from control of it.

The plan in four stages

1. Structures established early, with flexibility built in so they can adapt to changing circumstances.
2. Control retained by the founders, with the scope to transfer this to the family when the time is right.
3. Funds held in suitable vehicles: sale proceeds, and amounts needed for personal, family and reinvestment purposes, are positioned in vehicles designed to provide Inheritance Tax protection.
4. Next generation introduced progressively into ownership and governance, with regular reviews of ownership, governance and tax position.

The outcome

The founder has a succession plan in place well ahead of a sale expected within ten years. Key results:

• Projected Inheritance Tax saving of up to £8 million
• Control retained by the founder throughout
• Flexibility retained over access to assets and funds
• A phased succession plan completed over approximately five to seven years
• Enables future sale proceeds to be realised and reinvested tax free, subject to stated assumptions
• A formal governance and wealth management framework

As with any lifetime gifting, including into trust, the founders had to get comfortable with losing access personally to the funds, but done in a way that allows them to control how funds are invested and who benefits from them in the future.

Services delivered

• Tax-efficient will structure and letters of wishes
• Lifetime trusts and share transfers
• A Family Investment Company integrated with the trust structure
• Legal documentation prepared by a law firm, with transactional support from Oldfield

Important information

The projected saving of up to £8 million is based on this client’s circumstances and these assumptions: the business grows from £12 million to £35 million and is sold at £35 million; the saving is measured against the position under the Inheritance Tax rules in force from April 2026; and the rules are those in force at the time the planning was implemented. It is a projection, not a guarantee. Actual outcomes depend on valuations, the timing of gifts and any sale, the detail and timing of the business structure, the nature and structure of any reinvestment, survival periods, family circumstances and changes in legislation. This article is general information, not advice. Please take specific advice before acting.

Discuss your own succession plans

If you own a business and are considering succession or a future sale, contact Oldfield Advisory to arrange an initial discussion.