Passing on Your Family Business Without Leaving Difficult Decisions Behind

At Navigate, our experience of working with family businesses has shown us how much easier succession planning can be when conversations start early. However, when you’re in the thick of running a business, handing it over can feel a long way off, so it’s easy to put those conversations off until circumstances force a decision.

In this article, we’ll look at how to plan for your retirement income and divide ownership fairly, along with explaining the different ways to pass on your business and the tax implications of each.

Start with the retirement you want

Before deciding how to transfer the business, consider how you would like your own involvement to change.

You may want to leave completely, reduce your working week or remain involved in major decisions. If you expect to keep receiving income from the business, work out how much you will need and whether the proposed arrangements can support it.

We can help you assess the income you’ll need and what the business can realistically afford, so your plans are based on figures you feel comfortable with.

Decide what fairness means for your family

An equal division of shares may seem straightforward until one child works full-time in the business and another has a separate career.

The person running the company may want to reinvest profits. A relative who relies on dividends may prefer more money to be paid out. So, discuss how working family members will be paid and how shareholders will benefit from ownership. It is also worth agreeing what happens if someone wants to sell their shares.

Sometimes, other family assets can help balance an inheritance while leaving business ownership with the people involved in running it. The right arrangement will depend on what is available and what your family considers fair.

Check the tax position before promising shares

Family ownership does not automatically make a business exempt from Inheritance Tax.

Business Relief can reduce the taxable value of qualifying business interests. For deaths from 6 April 2026, the individual allowance for 100% relief is £2.5 million, shared between qualifying business and agricultural property. Qualifying value above the available allowance generally receives 50% relief.

Unused allowance can be claimed from a deceased spouse or civil partner, potentially increasing the survivor’s allowance to £5 million.

Eligibility also depends on the business’s activities. Businesses mainly involved in holding investments generally fall outside Business Relief, and there are conditions around ownership periods and surplus assets. We can help you check whether relief is available, particularly if the business has changed since your last review.

Get a realistic picture of the value

For Inheritance Tax, market value is the starting point. A private company valuation needs to consider the particular shareholding and the information relevant to a potential buyer. Depending on the business, dividend prospects and the rights attached to the shares can matter alongside its financial position.

Getting an appropriate valuation early helps you assess the likely tax exposure and discuss the proposed division of ownership using realistic figures. Let us know if you’d like help arranging a business valuation.

Passing the business through your will

Leaving shares in your will allows you to retain ownership during your lifetime.

Ask your solicitor to review the will alongside the company’s articles and any shareholders’ agreement. Those documents need to support the intended transfer, including any restrictions on who can inherit or acquire shares.

You should also agree who could keep the business running if you died unexpectedly. And that person doesn’t necessarily need to be the eventual owner.

Making gifts during your lifetime

Giving shares to adult children during your lifetime can give them time to settle into ownership while you’re still available to support them.

An outright gift will generally fall outside your estate if you survive for seven years, provided you have not retained a benefit in the gifted property.

Giving away shares can also create a Capital Gains Tax liability, even when you receive no payment. We can help you understand the potential tax cost before making a gift and check whether relief is available.

Using a trust

A trust can allow trustees to manage shares for beneficiaries under agreed terms. This may be useful where children are young or the family wants ownership to be managed over a longer period.

The tax treatment depends on the trust. Inheritance Tax can arise when assets enter certain trusts, at ten-year anniversaries and when assets leave. Those potential charges need to be weighed against the reasons for using the arrangement.

Work out how any tax bill would be paid

A valuable business may have relatively little cash available outside its day-to-day operations. Consider how the family would meet a tax liability while keeping enough money in the business.

For qualifying business property inherited from 6 April 2026, Inheritance Tax can be paid in equal annual instalments over ten years, interest-free if paid on time. Selling the property can bring the outstanding balance forward. This can help with timing, although the payments still need to be affordable.

Talk to us about your plans

You may already know who you would like to take over, or you may still be working through the possibilities. You’re welcome to speak to us at either stage.

At Navigate Accountancy, we always take the time to understand what you want for yourself and your family, then help you work through the financial and tax decisions involved. Feel free to give our team a call on 01709 589 439 to discuss succession planning for your family business.