The inheritance tax (“IHT”) landscape for business owners changed significantly on 6 April 2026 following the reforms to Business Property Relief (“BPR”) and Agricultural Property Relief (“APR”). Under the new regime, 100% relief is generally available only on the first £2.5 million of qualifying business and agricultural assets, with qualifying assets above that threshold generally receiving relief at 50%, resulting in an effective 20% IHT charge on the excess value.
For many business owners, this represents a fundamental shift in succession planning. Historically, qualifying business assets could often pass between generations free of IHT through the availability of unlimited 100% BPR. As a result, trusts were frequently used as part of wider family succession planning structures without creating a significant IHT exposure. The April 2026 changes have caused many families to reconsider how business and investment wealth should now be structured for future generations.
Family Investment Companies
One structure receiving increased attention is the Family Investment Company (“FIC”).
A FIC is typically a UK-incorporated and UK-tax resident company established to hold family wealth and investments. Parents or founders will often retain voting shares and directorships, allowing them to maintain control over investment decisions and dividend policy, while children or trusts hold non-voting growth shares designed to benefit from future increases in value.
The attraction of a FIC is often the combination of control, succession planning and long-term investment management. Investment returns can be retained and reinvested within the corporate structure, and future growth can potentially accrue to younger generations through growth shares without founders relinquishing day-to-day control.
However, FICs should not necessarily be viewed as a replacement for trusts.
Continuing role of trusts
Trusts continue to provide significant advantages which companies alone cannot replicate. In particular, discretionary trusts can offer:
- Asset protection
- Flexibility regarding future beneficiaries
- Protection against divorce and creditor claims
- Control over when younger beneficiaries receive wealth
- Long-term succession planning across multiple generations
Importantly, despite the April 2026 BPR reforms, trusts remain highly relevant. Whilst trusts are now subject to the revised BPR regime and relevant property charges, they continue to provide a valuable framework for controlling and protecting family wealth. Indeed, the new rules may increase the importance of careful trust planning where families wish to manage future IHT exposure proactively rather than relying solely on reliefs available on death.
Combining trusts and Family Investment Companies
As a result, many sophisticated family wealth structures now combine both vehicles.
A common approach is for a discretionary trust to hold shares in a FIC. In that structure, the company acts as the investment and wealth accumulation vehicle, while the trust provides asset protection, succession planning and flexibility regarding future beneficiaries. The trustees retain control over how future generations benefit from the underlying wealth, while the company provides a tax-efficient framework for investment management and reinvestment.
Choosing the right structure for succession planning
For many business-owning families, the question is therefore no longer whether to use a trust or a FIC. Increasingly, the discussion is whether a combination of both structures provides the most effective long-term solution.
Following the April 2026 BPR reforms, succession planning has become less about relying on inheritance tax reliefs alone and more about implementing robust structures capable of preserving family wealth, maintaining control and facilitating orderly transfers between generations. In that context, both trusts and Family Investment Companies continue to play an important role in modern estate planning.
