Do you pay Inheritance Tax when you inherit a business?

Inheritance Tax is paid by the estate during the administration process. This means if you are a beneficiary inheriting a business, Inheritance Tax will already have been paid and you won’t have to pay it.

If you are an executor who is also inheriting a business, you will need to cover the Inheritance Tax bill as part of the administration of the estate.

At Provira, meet many executors who are struggling to work out how the estate will cover Inheritance Tax, often while grieving. 

We understand the emotional drain it can be, and that’s where our Estate Advance can offer a practical way forward. 

Offering up to 50% of the total value of the estate within days, it can help to alleviate unnecessary financial pressure, allowing executors to focus on more important things. 

Not only this, but we only charge simple interest, not compound interest, there are no early repayment fees, we deal with HMRC directly and we don’t ask for personal collateral or any monthly repayments. 

The loan is simply repaid in full once the estate has been settled and the funds have been released. 

For more information, fill out our form to discuss your options with our compassionate team. 

Are businesses exempt from Inheritance Tax?

No, they’re not exempt. Businesses are included as part of the deceased’s estate, so the 40% standard rate of Inheritance Tax IHT is charged on the total value that sits above the nil rate band, £325,000. 

Historically, Business Property Relief (BPR), has provided a very generous Inheritance Tax relief option, allowing a business to pass to the next generation with little confusion or financial burden.

However, recent changes to the rules by HMRC – due to come into effect in April 2026 – now mean that there is a cap on the amount of relief that businesses receive under Business Property Relief. This sits at £2.5million. The value of the estate that sits above this threshold will now receive only half the amount of relief, at a tax rate of 20%.

This is why it’s key for estates with businesses to explore all the allowances and exemptions available to reduce the value of their estate and, subsequently, their Inheritance Tax bill.

How do family businesses avoid Inheritance Tax?

Business Property Relief, gifting, spousal exemptions and trusts can all help family businesses avoid Inheritance Tax and reduce their final bill. 

Each one provides a different way to lower the total value of the estate, meaning less of it will sit above the taxable threshold. Let’s walk through them.

Business Property Relief

This is available if the business has been owned by the estate for more than 2 years before the date of death. The business itself also has to be actively trading. If it is an investment-focused business, such as property rentals, it often doesn’t meet the criteria. 

Recent changes to the amount of BPR estates receive means that, as of April 2026, the 100% relief applies to the first £2.5 million of the estate value. The value of the estate above this is then likely to be charged at a rate of 20%. It’s important to note that with spousal transfers, this £2.5 million allowance can be transferred to a surviving partner.

Spousal Exemptions

Married couples or civil partners are able to take advantage of allowance transfers to reduce an Inheritance Tax bill. If a partner dies, their unused allowance transfers to their surviving partner. Then, when the surviving partner dies, the two allowances are combined and applied to their estate. 

This is great news for any estate looking to lower their Inheritance Tax bill. For business purposes, this is particularly significant as it means the business would instead have a cap of £5 million for 100% BPR.

Gifting

As with any estate, gifting, if done with careful planning, can help to pass wealth down without being charged Inheritance Tax. Gifting business shares has previously served the same purpose, sitting under the 7-year rule. This rule allows any assets that are gifted 7 years or more before death to be exempt from IHT. 

With the introduction of the BPR cap in April 2026 it’s important to note a new change for business share gifting, and one that could raise an Inheritance Tax bill.

Previously, all failed Potentially Exempt Transfers (PET) – the term used for gifts under the 7-year rule – wouldn’t matter for business shares as they were covered by 100% BPR.

As of April 2026, if the date of death falls within 7 years of the gift, the cap means that the value of the gifted business shares will be included in the net value to the estate. Pushing the value of the estate up increases the amount that is at risk of being taxed, increasing your Inheritance Tax bill.

At Provira, we’re proud that our products can help families move through confusing legislation to focus on more important things. 

Our Estate Advance provides executors with up to 50% of the estate net value, within days, giving you the time and headspace to navigate this challenging time with confidence. 

It’s designed to make it as easy as possible, charging simple interest, not compound interest, no early repayment fees, no personal liability, and only asking for repayment once the estate has been settled and funds are released. 

For more information, reach out to our team today. We’re here to help.

Can my children inherit my business?

Yes, your children can absolutely inherit your business. There are no legal restrictions as to who you leave your business to in your will. 

The type of business affects the way in which your children inherit on a practical level. Simply, they will replace the structure you currently have.

If you’re a sole trader:

• They will receive everything to do with the business. The assets, related business properties, stock, equipment and all contractual relationships. Any existing debt will be paid off before the estate is distributed to beneficiaries.

• They can continue the business as is or choose to take it in a new direction.

If you’re in a business partnership:

• Your children receive your share.

• There may be restrictions and rights around who can become a partner, so this is important to know before you assume your children will take your place.

If you’re involved in a limited company:

• Your children become shareholders by inheriting your shares. They may be charged Capital Gains Tax at a later date.

• The company continues on as its own legal entity.

How Provira helps pay Inheritance Tax when you inherit a business

For a beneficiary, inheriting a business can be an exciting opportunity. Whether you’ve been involved prior to the inheritance or not, it can open many doors. 

As an executor, dealing with an estate that involves a business can be complicated. There are many elements to consider, and it’s important to take specialist advice to ensure you go about it the right way. Particularly when it comes to finances.

At Provira, we know receiving a high Inheritance Tax bill can feel incredibly daunting. As an executor, navigating the many steps involved in the probate process is a challenge enough, without wondering how you’re going to meet the 6 month Inheritance Tax deadline. 

Unfortunately, finding the funds to cover an Inheritance Tax bill often isn’t simple. And while the estate may hold value, if they’re tied up in business assets which can’t be sold until probate is complete, you can feel incredibly stuck.

If you are an executor and you need help paying Inheritance Tax, Provira’s Estate Advance can help.

With Provira’s Estate Advance you can: 

• Access up to 50% of the net value of the estate within days.

• Pay off Inheritance Tax and other urgent estate expenses straight away.

• Rest easy, knowing our compassionate, supportive team is on hand to guide you through the process.

For more information, reach out to us today.