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Business Succession Planning

Also known as: Succession Planning

Definition

Business succession planning is the process of deciding who will own and run your business after your death or retirement, and how to transfer it efficiently while minimizing tax and preserving value.

This planning is essential for any business owner creating a will, as your business assets form part of your estate and require specific provisions to ensure continuity.

What Does Business Succession Planning Mean?

Business succession planning ensures business continuity while enabling efficient wealth transfer. Your will determines who inherits your business interest—shares, partnership stake, or sole trader assets—but corporate documents like shareholders' agreements govern operations. These must work together to avoid legal disputes.

Business Property Relief (BPR), provided under sections 103-114 of the Inheritance Tax Act 1984, offers tax relief for qualifying businesses owned for at least 2 years. From 6 April 2026, 100% relief is capped at £1 million—assets above receive only 50% relief, resulting in 20% effective inheritance tax.

Sarah owns a £2 million marketing agency. Her succession plan includes a will leaving shares to her daughter Emma, updated shareholders' agreement, and 3-year training program. Under April 2026 rules, the first £1 million receives 100% relief while the remaining £1 million faces 20% tax (£200,000).

David and James are equal partners in an architecture firm. Their partnership agreement includes a "buy-sell" clause: if one dies, the survivor purchases the deceased's share. David's will leaves his partnership interest to his wife Lisa, noting James's purchase right. This coordination ensures business continuity while protecting Lisa's interests.

Starting 3-5 years before exit allows you to develop successors and optimize tax position. Without planning, 60% of businesses fail within two years of the owner's death—staff leave, clients lose confidence, and value drops 25-40% on average.

Common Questions

"When should I start planning for business succession?"

You should start business succession planning at least 3-5 years before you intend to exit or retire. This gives you time to identify and develop successors, address tax planning opportunities, and ensure smooth transition. However, many experts recommend starting even earlier—ideally as soon as your business becomes established and valuable.

"Can I pass my business to my children without them paying inheritance tax?"

Your business may qualify for Business Property Relief (BPR), which can provide 50% or 100% inheritance tax relief if you've owned it for at least 2 years. However, from April 2026, 100% relief is capped at £1 million—assets above this receive only 50% relief. Proper succession planning and will drafting can maximize available reliefs.

"What happens to my business if I die without a succession plan?"

Without a succession plan, your business passes according to your will or intestacy rules, which may not reflect business needs. Executors may struggle to keep the business running, key staff may leave, clients may lose confidence, and the business value could drop significantly. Your family may also face unexpected inheritance tax bills requiring a forced sale.

Common Misconceptions

Myth: "My business partner automatically inherits my share of the business when I die."

Reality: Your business share passes according to your will, not automatically to your partner. Partnership or shareholders' agreements may give your partner purchase rights. Without proper planning, your spouse might inherit your share and become your partner's co-owner.

Myth: "I don't need to worry about inheritance tax on my business because businesses are tax-free."

Reality: Business Property Relief provides relief for qualifying businesses, but not all qualify. From April 2026, only the first £1 million receives 100% relief—assets above face 20% effective tax. Investment businesses and those owned under 2 years don't qualify.

  • Business Property Relief: The primary tax relief mechanism used in succession planning, providing 50% or 100% relief for qualifying businesses.
  • Company Shares: The asset transferred in limited company succession—your will transfers shares, and their value determines inheritance tax liability.
  • Partnership: Partnership succession follows different rules—your will disposes of your interest, but partnership agreements may give partners purchase rights.
  • Director: Director succession (who manages) is separate from ownership succession—your will transfers shares, but Articles govern directorship.
  • Controlling Interest: Whether your estate passes controlling interest affects business valuation and who makes decisions after your death.

Need Help with Your Will?

If you own a business, your will is crucial for protecting what you've built. Without proper provisions, your business could fail, your family could face unexpected tax bills, or disputes could destroy years of hard work.

Create your will with confidence using WUHLD's guided platform. For just £99.99, you'll get your complete, legally binding will plus three expert guides. Preview your will free before paying anything—no credit card required.

Legal Disclaimer:

This article provides general information only and does not constitute legal or financial advice. WUHLD is not a law firm and does not provide legal advice. Laws and guidance change and their application depends on your circumstances. For advice about your situation, consult a qualified solicitor or regulated professional. Unless stated otherwise, information relates to England and Wales.