Family Business Owners Need To Plan Early To Manage Impacts Of IHT Change

Early planning is key to family business owners to effectively manage and understand their potential exposure to “double taxation” when unused pension funds are brought into estates for inheritance tax (IHT) from April 2027, warns Hymans Robertson Personal Wealth.

Owners that delay decisions until the last minute could leave more wealth exposed to both IHT and potential income tax on inherited funds. There’s a clear window of opportunity ahead of the change that should be taken, warns the financial advice firm. Existing arrangements should be reviewed to ensure they remain aligned with long-term financial and family objectives.

Reviewing how family business owners’ pension arrangements interact holistically with their overall wealth is also vital. Owners have a range of considerations when thinking about how pensions fit into their wider financial and legacy plans. They must understand the tax implications of the change, but the types of assets held within pensions and how they are structured will also influence the plans’ effectiveness. Taking time now to review all these areas, ahead of the IHT change can help build a clearer, more joined up view of owners’ financial, succession and estate planning.

Commenting on why family business owners should focus on IHT now, Jeff Simpson, Head of Wealth Management & Private Office Services, Hymans Robertson Personal Wealth says:

“Early action on the impending changes to IHT can give family business owners the opportunity to properly consider how their pensions sit alongside their business, family intentions, and broader financial plans. This prevents rushing into reactive decisions closer to 2027."

"Starting now gives space to weigh up different priorities and see a holistic picture. Financial security in retirement is key but owners still need to consider supporting family, or managing tax exposure, and need to strike a balance between them."

“Acting soon also allows more time to think about how assets are held within pensions, including how accessible or flexible they may need to be over time. These are practical considerations that won’t change the tax rules themselves but can make a meaningful difference to how smoothly plans can be carried out. Those who review arrangements now can be far better positioned to retain control and flexibility as the changes approach."

“For many business owners, pensions have become one of their larger assets outside of their business, yet they’re often still treated separately from wider estate planning. Bringing pension funds into scope for IHT highlights the importance of taking a more well-rounded approach. This is particularly important where decisions may not have been revisited for some time. Often, the challenge is less about complexity, and more about leaving decisions too late.”

Commenting on the importance of each family business owner finding the right strategy for them, Jeff adds:

“There isn’t one single ‘right’ response to these changes, and that’s what makes early, joined-up planning so important. Decisions around pensions are personal and need to reflect an owner’s individual circumstances rather than being made in isolation. It’s important to reflect on how income will be used in retirement, how wealth is passed on through the family, and how other assets, such as ISAs or business wealth, fit into the picture."

“For some owners, that may mean revisiting how, and when, pension income is taken, while for others it could be about ensuring beneficiary nominations and existing arrangements still reflect their current situation. These decisions can also evolve over time as personal priorities or family circumstances change."

“Starting that process earlier gives family business owners the space to fully explore their options and adjust where needed in time. By contrast, delaying it may mean limiting flexibility and reducing the ability to shape outcomes in a way that fully reflect what matters most to them and their families.”