Question to the HM Treasury:

To ask the Chancellor of the Exchequer, what assessment she has made of the adequacy of the capacity of family-owned trading businesses to fund inheritance tax liabilities within six months of death, particularly where probate has not been granted.

The reforms to business property relief from 6 April 2026 get the balance right between supporting businesses, fixing the public finances, and funding public services. The reforms reduce the inheritance tax advantages available to owners of business assets, but still mean those assets will be taxed at a much lower effective rate than most other assets. Despite a tough fiscal context, the Government will maintain very significant levels of relief from inheritance tax beyond what is available to others and compared to the position before 1992 when the rate of relief was a maximum of 50 per cent on all business assets, including the first £2.5 million.

Excluding estates only holding shares designated as ‘not listed’ on the markets of recognised stock exchanges, the reforms are now expected to result in up to 220 estates across the UK only claiming business property relief paying more inheritance tax in 2026-27. This means just over 80 per cent of such estates making claims are forecast to not pay any more inheritance tax.

The rules for business property relief are longstanding and business assets do not qualify for 100 per cent relief under the current rules if they do not meet qualifying conditions, such as the minimum period of ownership test and the nature of the business.

Where inheritance tax is due, those liable for a charge can pay any liability on the relevant assets over 10 annual instalments, interest-free. Any liability can also be settled through the disposal of any assets within the estate where appropriate. Where share buybacks are used to fund a liability, special treatment has also existed in the system since 1982 for shares in unquoted companies when inheritance tax could not otherwise have been paid without undue hardship.

More generally, HMRC recognises the difficulties that personal representatives may face when raising funds to pay inheritance tax and has a number of established ways to help tax payments be made. This includes the Direct Payment Scheme which can be used to transfer money electronically directly from the deceased’s account(s) to HMRC to settle the liability before probate is granted. There are also other options available if the inheritance tax cannot be paid before probate is granted, such as applying for a grant on credit. This allows payment of all or some of the tax and interest due to be postponed until after the grant of probate.