Family investment companies after the April 2026 inheritance tax changes

For years, many families treated Business Relief as the answer to inheritance tax on the family business. From 6 April 2026 the position changed, and it changed again before the final figure was settled. If you own a family investment company, or are thinking about one, it helps to be clear about which of those changes touch you and which do not.

What changed on 6 April 2026

Business Relief (BR) and Agricultural Relief (APR) used to give 100% relief with no upper limit on qualifying property. From 6 April 2026 there is a cap. 100% relief applies to the first £2.5m of combined qualifying business and agricultural property per person. Above that, relief is 50%.

Three further points matter in practice.

• The allowance is transferable. An unused allowance can pass to a surviving spouse or civil partner.
• It is per person, not per business. If you own several qualifying interests, they share one allowance.
• It will be indexed later. The allowance is linked to the Consumer Prices Index from 6 April 2031, not before.

The figure was first announced as £1m. It was raised to £2.5m on 23 December 2025, so you will still see £1m in older government papers and articles. Use £2.5m.

Certain unquoted shares, such as those traded on AIM, now qualify at 50% only.

What did not change for most FICs

The great majority of family investment companies hold investments: funds, shares, bonds, cash, perhaps some let property. The relief rules have never applied to them. Shares are not relevant business property if the company's business consists wholly or mainly of making or holding investments or dealing in land or buildings.

So for an investment-holding FIC, the April 2026 changes did not remove a relief you had, and the larger allowance did not give you one. The inheritance tax case for a FIC rests elsewhere.

Several other things stayed as they were:

• Gifts of shares to individuals are still potentially exempt transfers. There is no inheritance tax if the donor survives seven years, with taper relief on the tax if they die three to seven years after the gift.
• The nil-rate band (£325,000) and residence nil-rate band (£175,000) remain frozen. They are due to stay fixed up to and including 2030/31.
• A gift of cash directly to a company is still not a potentially exempt transfer. We come back to this in our article on mistakes families make.

Where a FIC can interact with Business Relief

There is one situation where the new allowance bears on a FIC. If the FIC is mainly a holding company of trading companies, it can qualify for relief, because the investment-company exclusion does not apply to a company whose business is mainly holding companies that are outside the exclusion. Assets not used for the business, called excepted assets, are not covered by relief.

That is often the position of a business owner who inserts a FIC above a trading company. It means the £2.5m allowance becomes relevant to the value of the trading shares. It also means surplus cash and investments in that structure can undermine relief if they build up. Our sister firm Holding Company (opens in a new tab) deals with the trading-group side, and our page on a family investment company above a holding company covers how the two fit together.

For a family where the trading business is worth more than the allowance, the 50% rate on the excess is where planning attention now goes. For a family whose wealth is already in investments or property, the question is different.

So why look at a FIC now?

Because the underlying problem has not gone away, and in some respects has grown. The nil-rate bands are frozen, property and investment values have risen, and from 6 April 2027 most unused pension funds will count towards the estate (see pensions in your estate from April 2027). More estates will meet the 40% rate than before.

A FIC does not remove tax on what you already own. What it can do is change where future growth accrues. The parents hold shares with a frozen value and the votes, and the growth builds in shares held by their children or a trust. We explain the mechanism in freezer shares explained. The aim is to cap the value in your estate while keeping control.

It is not a quick fix. Value leaves your estate only when shares, or cash used to buy them, are given away, and gifts to individuals take seven years to fall out of account. A loan you make to the company stays in your estate until repaid.

Three families, three different answers

It helps to picture who is asking.

• An owner whose business is worth £4m. Business Relief is likely to matter. Each person can shelter £2.5m at 100%, and the remainder is relieved at 50%. A couple may be able to use both allowances. The planning question is how to keep the business qualifying and what happens if it is sold.
• A couple with a £3m investment portfolio and a home. Business Relief is not available on investments. The inheritance tax case for a FIC here is about redirecting growth, not about the relief rules at all.
• A family with a property portfolio. Let property is generally an investment for Business Relief purposes, so the relief usually does not apply. Our sister firm Property Tax Advisory (opens in a new tab) deals with the property side, including moving it into a company.

The first step is the same for each: work out which assets qualify, and which do not, before choosing a structure.

What to do next

If you own a trading business, ask first whether it qualifies for relief and how much of its value sits above £2.5m, per person. If you hold investments or property, ask whether the growth you expect is worth structuring around.

Our inheritance tax calculator gives a rough idea of the tax at stake in the growth, using assumptions you can change. It is not advice. For advice on your own position, book a free call and we will respond the same working day.

This article is general information, not advice. Tax rules change and their effect depends on your circumstances. Law as at 9 October 2026. Please speak to us before acting.