Inheritance Tax changes: what family businesses in Scotland need to know

On 6 April 2026, we entered into the new Inheritance Tax (IHT) regime, making it more likely that tax will be payable when business assets are passed on after death, and the process of dealing with the estate of a loved one is likely to become more complex.

For generations, family businesses have been able to pass on qualifying business and agricultural property assets free of IHT as 100% Agricultural Property Relief (APR) and Business Property Relief (BPR) was available. This is now capped at a combined allowance of £2.5m per person, or £5m for a married couple, with 50% relief applying to qualifying value above that level.

Why confirmation may feel harder after April 2026

Although the allowance was increased from the originally proposed £1m, many family businesses will still feel the impact of the restrictions on the reliefs under the new regime. Where APR and BPR reliefs still apply, the process will be more document-heavy, with more formal IHT reporting, detailed valuations and tighter timescales, and the steps to secure confirmation can feel daunting at the worst time.

Crucially, everything is linked. The valuer’s figures affect the accounts; the accounts affect the IHT position; and confirmation cannot progress until the IHT process is sufficiently advanced.

How the reforms affect family businesses

Every estate is different, but families will need to consider the following practical points:

1. Clearly document the estate story

   For family businesses, it is essential to understand exactly what is owned, by whom, and in what capacity. Shares, partnership interests, business premises, directors’ loan accounts, inter-company balances and personal assets used by the business should all be clearly documented. This should be reflected in shareholder agreements, partnership agreements, wills and business records long before a death occurs.

2. Start valuations early

   Many estates involving trading businesses, family companies, partnerships or mixed business assets will require full IHT reporting even where reliefs are expected to apply. Valuations should therefore begin early. Business interests, shares, property, stock, plant and machinery, surplus cash and investment assets may all need to be considered, so it is important that accountants, solicitors and valuers work together from the outset.

3. Prepare and submit IHT return with evidence

   Any IHT liability can be paid by instalments over 10 years, with the first instalment payment due six months after the date of death and annually thereafter. The solicitor cannot move forward with confirmation until the relevant IHT position has been addressed. This means all valuations, preparation of accounts, and forms need to be completed much quicker than under the old system, and where previously it was common for estimated or historic valuations to be used for IHT purposes, this is likely to be more problematic than it once was.

   4. Consider areas HMRC may challenge

   Before submitting the IHT forms, ensure that the key areas commonly challenged by HMRC have been carefully reviewed. In particular, consider:

• Whether the business is predominantly a trading business rather than one mainly engaged in investment activities.
• Whether any property or cash held within the business is genuinely required for the purposes of the trade.
• The ownership structure of the assets, including whether they are held personally, by a company, within a partnership, or through a trust.
• Whether the business holds any excepted assets which will not qualify for Agricultural Property Relief (APR) or Business Property Relief (BPR) - for example, surplus cash, investment assets, or property not used in the business.

Take action now

The key message for family businesses is to prepare before the pressure of bereavement. Executors will need reliable figures, clear ownership records and advisers who can work together quickly. A well-maintained set of records can reduce delay, uncertainty and the risk of unexpected IHT exposure.

This means it is important to ensure you review your wills, shareholder or partnership agreements and succession plans.

If information is missing, the process can take weeks longer and the final IHT position may change as evidence emerges. For Scottish family firms, where wealth is often tied up in property, shares or long-held trading assets, early preparation can make a significant difference.