Succession planning is a deliberate, agreed order in which personal wealth, property and a family business pass to the next generation. A good plan answers three questions: who receives which assets, when and on what terms; how much Inheritance Tax will be payable; and who will take over the running of the business. In the UK this has become noticeably more complex after the reforms of 2025–2027, so even plans drawn up a few years ago are worth reviewing.
What succession planning is and why it matters
Succession planning is a combination of legal and tax decisions that determine what happens to family wealth during the owner’s lifetime and after death. It covers the will, gifts to heirs, trusts, the ownership structure of businesses and property, pension savings and life insurance. There is also a management side: who will lead the company once the founder steps back, and how shares should be divided between children when not all of them work in the business.
Before choosing any tools, a family usually needs to answer a few basic questions:
- At what age should your children gain access to the wealth, and how much of it?
- Are controls or restrictions needed for a period of time, for example until they finish their studies or reach a certain age?
- Who will run the family business after the founder steps down, and how will this affect the shares of the other heirs?
- Where will the heirs live, and in which countries are the assets held?
Without a plan, an estate can lose a significant part of its value. The standard rate of Inheritance Tax in the UK is 40% on the value above the tax-free threshold. On top of that come the costs of administering the estate (probate), the risk of family disputes and, where there is a business, a period of uncertainty when nobody is effectively in charge.
Below we look at how Inheritance Tax works after the abolition of the non-dom regime, which tools are available to families and where mistakes most often occur.
How UK Inheritance Tax works after the 2025 reform
Inheritance Tax is charged on the value of a deceased person’s estate, and also on certain gifts and transfers into trusts made during their lifetime. The core figures are published on the official GOV.UK page:
| Item | Value |
|---|---|
| Nil-rate band | £325,000 |
| Residence nil-rate band (home passed to children or grandchildren) | £175,000; gradually reduced where the estate is worth more than £2 million |
| Standard rate | 40% on the value above the threshold |
| Reduced rate | 36% if at least 10% of the net estate is left to charity |
| Transfers to a spouse or civil partner | Exempt; any unused threshold passes to the surviving spouse |
| Payment deadline | By the end of the sixth month after death |
The thresholds are not indexed. According to the Budget 2025 overview of tax legislation and rates, the nil-rate band, the residence nil-rate band and the £2 million taper threshold are fixed until 5 April 2031. In practice, as property and asset values rise, more and more families fall within the tax.
Timing matters too. The tax usually has to be paid before the grant of representation is issued. As the HMRC guidance on paying Inheritance Tax explains, heirs sometimes have to find cash before they can access the estate. That is why a plan should set out in advance where the money for the tax will come from.
Who counts as a long-term resident
From 6 April 2025, domicile has been replaced by a long-term residence test for Inheritance Tax purposes. According to GOV.UK guidance, you are a long-term UK resident if you have been UK tax resident for at least 10 of the previous 20 tax years. For such a person, overseas assets as well as UK assets may be subject to Inheritance Tax.
The status continues after leaving the country, for a period that depends on how long the person lived in the UK:
| Years of UK tax residence | How long the status continues after leaving |
|---|---|
| 10–13 | 3 years |
| 14 | 4 years |
| 15 | 5 years |
| Each further year | One more year, up to a maximum of 10 years |
For former non-doms and new residents this fundamentally changes the calculation: overseas wealth that used to sit outside UK Inheritance Tax can come within it after ten years of living in the country. You can read more about the new regime on the page on UK inheritance tax under the residence-based regime. An analysis of UK tax residency under the Statutory Residence Test helps establish your own position.
When succession planning is especially important for a family
- Owning a family business that is due to pass to the children
- Holding property and investments in more than one country
- Approaching 10 years of UK tax residence under the new rules
- Planning a move to the UK or a departure from the country
- A second marriage, children from different marriages or heirs abroad
- Substantial pension savings in light of the rules from April 2027
- No up-to-date will in the country where you live
If even one of these points applies to you, the plan should be built not around a single document but around a combination of tools. Let us look at the main ones.
Wealth transfer tools: wills, gifts and trusts
Each tool has its own tax consequences, degree of control and timing. A plan usually combines several of them, and the choice depends on the mix of assets, the age of the heirs and how much control the owner wants to keep.
Wills
A will is the starting point of any plan. It sets out who receives the estate, who will act as executor and who will be guardian of any minor children. Without a will, the estate is divided under the intestacy rules, which may not match the family’s wishes. People with assets in several countries should check how an English will interacts with the law of other jurisdictions, such as forced heirship rules. You can read more on our page about wills and inheritance in the UK.
Lifetime gifts and the 7-year rule
Lifetime gifts are one of the simplest ways to reduce a future estate. Under the GOV.UK rules on gifts, no Inheritance Tax is due on a gift if the giver lives for 7 years after making it. If death occurs earlier, tax on gifts above the threshold is charged at a reduced rate (taper relief):
| Time between gift and death | Tax rate |
|---|---|
| Less than 3 years | 40% |
| 3–4 years | 32% |
| 4–5 years | 24% |
| 5–6 years | 16% |
| 6–7 years | 8% |
| 7 years or more | 0% |
There are also annual exemptions that apply regardless of the 7-year rule:
- £3,000 a year in total; any unused allowance can be carried forward for one tax year only;
- gifts of up to £250 per person each tax year, provided no other allowance is used on the same person;
- wedding or civil partnership gifts of up to £5,000 to a child, £2,500 to a grandchild or great-grandchild and £1,000 to anyone else;
- regular gifts out of income, with no limit, as long as you can maintain your usual standard of living.
The main trap is a gift with reservation of benefit. If you give your home to your children but continue to live there without paying market rent, it still counts as part of your estate. These conditions are explained in the GOV.UK section on passing on a home.
Trusts
A trust allows assets to be passed on without handing heirs full control straight away: the property is managed by trustees according to the rules set by the settlor. This is useful when the children are still young, when capital needs protecting in the event of an heir’s divorce, or when income is to be shared across several generations. Trust taxation is complex. According to HMRC guidance on trusts and Inheritance Tax, transfers into most trusts above the threshold are taxed at 20% if the trustees pay. Tax is then charged at each 10-year anniversary, and up to 6% when assets leave the trust.
| Tool | Owner’s control | Tax effect | Suitable for |
|---|---|---|---|
| Will | Full until death | Does not reduce tax on its own, but allows exemptions to be used | Everyone |
| Outright gift | Lost immediately | Falls outside the estate after 7 years | Those ready to pass on assets now |
| Trust | Through the trust terms and trustees | Separate regime: 20% on transfers above the threshold, periodic charges | Families with young heirs and complex structures |
| Family investment company | Through the articles and share classes | Depends on the structure; requires separate corporate tax analysis | Families with a large investment portfolio |
The choice between these tools is rarely obvious: the same structure can work well for one family and poorly for another because of where the heirs are resident or what the assets are.
Benefits of seeking succession planning advice from Imperial & Legal
- Analysis of family assets in the UK and other countries in one plan
- Inheritance Tax calculations under the long-term residence rules
- Selection of the right mix of wills, gifts, trusts and company structures
- Support with family business succession, including BPR and APR relief
- Consideration of the interests of heirs living in different jurisdictions
- Coordination with the client’s lawyers, banks and wealth managers
- Regular review of the plan as the law and the family change over time
Two types of asset need particular attention, because the rules for them have changed the most: shares in a family business and pension savings.
Passing on a family business: BPR and APR from 2026
For many years, shares in trading companies and agricultural assets could be passed to heirs almost free of tax thanks to Business Property Relief (BPR) and Agricultural Property Relief (APR). From 6 April 2026, full relief is capped. As the government press release of 23 December 2025 confirms, 100% relief applies to the first £2.5 million of combined qualifying assets. Above that amount, 50% relief applies, which means an effective tax rate of 20%.
Any unused allowance can be transferred to a spouse or civil partner, so a couple can pass on up to £5 million of qualifying assets with full relief. For families with a large business, this makes Inheritance Tax a real cost that has to be planned for in advance: which assets qualify for relief, how shares should be split between spouses, and where the heirs will find the money for the tax without selling the business.
| Value of qualifying assets | Relief | Effective tax rate |
|---|---|---|
| Up to £2.5 million (per person) | 100% | 0% |
| Above £2.5 million | 50% | 20% |
The management side is just as important. A business succession plan answers who will become the leader, how voting rights and dividends will work for children who are not involved in the company, and what happens if one of the heirs wants to leave the business. These arrangements are recorded in the articles of association, the shareholders’ agreement and the will at the same time.
Pension savings and Inheritance Tax from April 2027
Pension savings have traditionally sat outside the estate, so many wealthy families used pensions as a way of passing capital to their children. This is changing. According to the government policy paper on unused pension funds and death benefits, for deaths on or after 6 April 2027 most unused pension funds and death benefits will be included in the estate.
Personal representatives, rather than pension scheme administrators, will be responsible for reporting and paying any tax due on these amounts. Death in service benefits and dependants’ scheme pensions from defined benefit arrangements are excluded from the new rules. The exemption for death benefits passing to a surviving spouse, civil partner or charity remains in place.
The practical conclusion: if pension savings make up a significant part of your wealth, it is worth reviewing how you draw down funds, how benefits are divided between heirs and how the pension fits with the other tools in your plan.
Succession support
A complete plan for passing wealth and business to your heirs
Family asset review
Assets held in different countries and a review of tax risks
Tax modelling
Inheritance Tax projections under different transfer options
Business succession
Share structure, BPR and APR relief, handover of management
Ongoing family support
Plan reviews as the law and the circle of heirs change
Whatever the final plan looks like, the work on it follows the same logic, from gathering information to implementation and regular review.
How work on a succession plan is organised
Timescales depend on the number of countries where assets are held, whether there is a business involved and how quickly the family can provide documents. Below is a typical sequence of stages and the approximate length of each one.
Consultation and review of the family situation
Asset inventory and assessment of tax exposure
Designing a strategy for wealth and business transfer
Preparing documents and implementing the structure
Regular plan reviews and ongoing family support
Documents and information you will need
The more complete the initial information, the more accurate the tax calculation and the fewer surprises during implementation. As a rule, the following are requested to prepare a plan:
- passports and details of the tax residence of the client, spouse and heirs over the last 20 years;
- existing wills in every country where they were made;
- property documents and approximate market values;
- company constitutional documents, share registers and shareholders’ agreements;
- investment and bank account statements;
- details of pension schemes and insurance policies, including nominated beneficiaries;
- information about major gifts made in the last 7 years and any existing trusts.
You do not need to gather everything at once: a general description is enough for the first consultation, and the specific list is tailored to the family’s situation.
Practical examples: how a plan changes the outcome
Below are typical situations faced by wealthy families. These are general scenarios rather than descriptions of specific clients; the actual calculation always depends on individual circumstances.
A former non-dom with overseas wealth
An entrepreneur has been living in the UK for eight years, and most of his investments are held abroad. Under the old rules, these assets could stay outside UK Inheritance Tax until he became domiciled. Now, in two years he will become a long-term resident and his overseas wealth will fall within the tax base. A plan prepared in advance allows a decision to be made before that date, taking into account whether the family intends to stay in the country.
A family company and three children
The founder of a company worth around £6 million wants to hand management to his eldest son and give the other two children a fair share of the value. Without a plan, full relief will cover only part of the value, and the heirs will have to find money for the tax. Splitting assets between spouses, passing some shares on during his lifetime and a shareholders’ agreement with different share classes can reduce the tax burden and prevent disputes in advance.
A London home and children abroad
An elderly couple own a house in London and an investment portfolio, while their children live in other countries. The couple need to understand whether the residence nil-rate band will be available, how UK and foreign succession law interact and where the heirs will have to pay tax. Coordinated wills in two jurisdictions and a well-planned sequence of gifts help avoid double taxation and lengthy estate administration.
Similar issues, such as tax planning when relocating, buying property and protecting family wealth, are handled by Imperial & Legal for clients on a regular basis. Here are a few real stories.
Client stories on tax planning
Tax planning for married couple moving to England to settle (Indefinite Leave to Remain)
Tobias and Hannah moved to the UK from Austria. The couple received a pre-settled status, which is granted to EU citizens, permitting them to relocate...
Tax planning in England for a client with an investor visa
Andy is a long-standing client of Imperial & Legal. We helped him to obtain a UK investor visa and settle in London. He is originally from South Africa, but he changes locations quite often to...
Tax planning for a foreign person when moving and buying a property in England
Pablo is originally from South America. He has been living in Britain for several years. His business involves supplying construction equipment to...
Tax planning for married couple relocating to UK
Madina and Yuri are a married couple from Kazakhstan. They relocated to the United Kingdom a year ago when Yuri was invited to join a project to develop educational computer games. He agreed right...
One of these families explained why they decided not to deal with tax on their own when moving later in life.
For sure, at our age, moving to another country is like a natural disaster. But after considering everything, we decided to move closer to Hannah's sister who lives in the UK. It was only later that we realised how many issues we had to handle — selling our old house, purchasing a new one, and dealing with taxes! We had no idea how to do it all properly, so we were grateful that Imperial & Legal assisted us.
The experience of such clients shows that most problems arise not from the complexity of the rules but from decisions made without the full picture.
Common mistakes when passing on wealth
Even a well-designed plan can fail if one detail is overlooked. The most common mistakes are:
- A will that has not been updated for years. After a marriage, divorce, the birth of children or a move abroad, an old will may divide the estate very differently from what the family would want.
- A gift with reservation of benefit. A home or other assets are formally given to the children, but the giver continues to use them. For tax purposes, such a gift remains part of the estate.
- Ignoring the 10-year residence threshold. Families who have moved to the UK often remember the long-term residence test too late, when the options are already limited.
- Relying on full business relief. From April 2026, 100% relief is capped at £2.5 million, and without planning the heirs may need to sell part of the business to pay the tax.
- No cash to pay the tax. The tax must be paid within six months, usually before the grant of representation. If the wealth is tied up in property or a business, the heirs may simply not have enough money.
- Leaving pensions out of the plan. After April 2027, unused pension savings need to be included in the calculation alongside other assets.
- Documents in different countries that do not match. Wills in two jurisdictions may contradict each other or accidentally revoke one another.
Most of these mistakes can be avoided by looking at the family’s wealth as a whole rather than asset by asset, and by returning to the plan regularly.
Those who are only just planning a change of country should approach succession planning with particular care.
Succession planning when moving to or leaving the UK
A change of tax residence is one of the most convenient moments to review a plan, but also one of the riskiest. When moving to the UK, a family has time before the 10-year long-term residence threshold is reached. During those years it can set up a holding structure for overseas assets, decide which gifts to make and when, and prepare wills in the relevant jurisdictions. At the same time, it is worth taking into account the tax regime for new residents that replaced the non-dom regime.
When leaving the country, the situation is the mirror image. Long-term resident status does not disappear on the day you leave: depending on the number of years spent in the UK, it continues for between 3 and 10 years. Throughout that time, overseas assets may remain within UK Inheritance Tax. Leaving also affects Income Tax and Capital Gains Tax, including the temporary non-residence rule. These issues are covered in detail in our article on UK exit tax planning when you leave the country.
In both cases, a succession plan is best prepared together with the tax plan for the move, not after it. For families with several generations and assets in different countries, Imperial & Legal offers comprehensive tax planning for wealthy families, in which inheritance issues form a separate workstream.
Where to start your planning now
UK Inheritance Tax rules have changed more over the last two years than over the previous decade. Tax now depends on residence rather than domicile, full business relief is capped, and pensions will come into the estate from 2027. At the same time, the thresholds are frozen until 2031. For wealthy families, this means succession should be addressed early, while more options are still available, rather than late in life.
Key takeaways
- The standard Inheritance Tax rate is 40% above the £325,000 threshold; the thresholds are frozen until 5 April 2031.
- From 6 April 2025, tax on worldwide assets depends on long-term residence: 10 of the previous 20 tax years.
- Gifts fall outside the estate after 7 years; gifts with reservation of benefit remain within it.
- From 6 April 2026, full relief for business and agricultural assets applies to the first £2.5 million per person.
- From 6 April 2027, unused pension savings are included in the Inheritance Tax calculation.
- A plan should be reviewed after any major change: a move, a marriage, the sale of a business or a change in the law.
The information on this page is general in nature and does not constitute individual tax or legal advice. Tax consequences depend on specific circumstances, so professional advice should be obtained before making decisions.
