For Tax Practitioners — The Substantive Issues

A technical reference for solicitors and accountants advising on the post-April 2026 inheritance tax regime as it applies to unlisted trading-company shares. Anchored to legislation and case-law where it exists.

For tax practitioners: the substantive issues

This piece sets out the technical points in the post-April 2026 BPR regime for unlisted trading-company shares that the publication considers material, with the legislative anchors and the open questions you are likely to be asked about by your clients. It is structured around the genuine areas of doubt rather than the areas where the rules are clear.

The valuation problem and the SAV negotiation

For unlisted trading-company shares, open-market value at the date of death is determined by HMRC's Shares and Assets Valuation team under the framework in IHTM18000 et seq. The methodology applied to private-company holdings typically anchors on the most recent priced equity round, with adjustments for time elapsed, performance and outlook deviations, share-class differences (most rounds price preference shares; founders typically hold common stock), and the specific shareholder agreement in force.

The discounts you will be familiar with — minority discount of 15-30 per cent for non-controlling stakes, discount for lack of marketability typically 25-40 per cent, preference-stack waterfall analysis where applicable — produce, in practice, an SAV-agreed value of typically 50-70 per cent of headline paper value for venture-backed founder equity. The settled SAV value is what the 20 per cent effective rate is applied to, not the headline paper value.

The substantive issue the publication highlights is that this is a multi-year negotiation conducted with an estate that may not have access to specialist valuation expertise on the scale HMRC can bring. The settled outcome can move materially based on adviser quality, and the dispute caseload at SAV is a structural variable in the reform's operational success that the published modelling does not appear to address. If your client's estate is in a position to fund robust valuation work, the practical effective rate is likely to be in the 10-15 per cent range on headline paper value rather than 20 per cent. If it is not, the headline rate may apply more closely. This asymmetry is a known feature of the regime and is worth flagging to clients early in succession discussions.

Interaction with the post-2025 long-term-residence framework

The April 2025 non-dom reforms replaced the historical concept of domicile for tax purposes with a residence-based long-term-residence framework. From 6 April 2025, an individual is a "long-term UK resident" — and so liable to UK IHT on worldwide assets — once they have been UK-resident in 10 of the previous 20 tax years. The pre-2025 deemed-domicile rules continue to have legacy effects in transitional cases.

The interaction with BPR is that the long-term-resident test now controls the worldwide-asset exposure, not domicile of choice. A client seeking to escape long-term-resident status for their post-death IHT exposure must accumulate enough non-UK-resident years (under the FA 2013 Schedule 45 SRT) to fall outside the 10-of-20 test. The "tail" exposure for IHT after losing UK residence varies depending on prior length of UK residence and is set out in the post-2025 legislation; it is not a uniform three-year window in all cases. The post-2025 framework is more complex than the pre-2025 domicile-based framework, and the working-out of the new rules is still being settled by HMRC guidance and (eventually) tribunal decisions.

The publication notes that the relocation evidence base in the public debate often conflates non-dom-driven departures with potential BPR-driven departures, and that the OBR's 25 per cent figure is for non-doms with excluded property trusts, not for the BPR cohort. Practitioners advising clients on residence planning specifically for BPR exposure should not rely on the OBR figure as a base case for behavioural response in their cohort.

The CGT uplift on death and the absence of double taxation

TCGA 1992 s.62 applies to the transfer at death and provides the uplift to market value. The 2026 reform did not modify s.62. The combined effect for unlisted trading-company shares is:

Pre-reform: 100 per cent BPR removes the value from the IHT base; s.62 uplift wipes the unrealised gain for CGT purposes; the heir takes the shares at market value as base cost, with no IHT and no CGT borne by the estate or the heir on the appreciation accrued during the deceased's lifetime.

Post-reform: 100 per cent BPR up to £2.5m and 50 per cent above produces an effective 20 per cent IHT on the SAV-adjusted value above the threshold; s.62 uplift continues to wipe the CGT for the heir at the death-date value.

The substantive point: the post-reform regime does not produce double taxation in any usual sense. The CGT uplift continues to remove the lifetime gain. The IHT charge is the first tax event in the asset's life for the part above the threshold. Practitioners hearing the double-taxation framing from clients or in the public debate should be ready to explain that the rules do not work that way. The point is contested by some commentary, but the legislative position is clear.

This matters for client conversations because the framing of the reform as "double taxation" is widespread and produces resistance to engaging with the substantive question. A practitioner who can walk a client through the actual rules in 90 seconds typically finds the conversation moves to the genuine issues (timing, liquidity, mechanism) rather than getting stuck on the framing.

The instalment provision and what it does and does not do

The reform extended the ten-year interest-free instalment option, previously available for some forms of business property, to all APR/BPR-eligible property. Under IHTA 1984 s.227 as amended, the tax may be paid in ten annual instalments, in equal instalments over 10 years, interest-free.

This addresses much of the headline liquidity problem. A £2 million tax bill becomes £200,000 a year for ten years. For a mature operating business with distributable profits, the bill can usually be funded out of dividends or board-approved distributions. For a high-growth tech company that does not pay dividends and is reinvesting its operating cash flow, the bill is harder to fund without either selling some shares (which the heir may not be able to do) or borrowing against the holding.

The instalment provision is one of the most important features of the regime for practitioner advice and one of the least well-understood in the public debate. A piece that argues the reform produces forced sales of operating businesses is over-claiming relative to the rules as drafted. A piece that argues the instalment provision fully resolves the liquidity issue is also over-claiming. The honest practitioner reading is that the provision substantially reduces but does not eliminate the liquidity pressure, and that the residual pressure is concentrated in the sub-cohort of high-growth businesses without distributable cash.

Section 105 IHTA 1984 and the qualifying-trading-company definition

The reform did not modify the definition of "relevant business property" under IHTA 1984 s.105. Unlisted trading-company shares qualify if the company is wholly or mainly engaged in trading rather than investment activity. The boundary between trading and investment for mixed-activity companies remains a point of practitioner judgement and HMRC negotiation, governed by case-law including Farmer v IRC [1999] STC (SCD) 321 and the subsequent line.

The substantive issue practitioners may encounter is that some venture-backed companies hold significant cash reserves from recent funding rounds, and HMRC may scrutinise whether the cash represents working capital for the trade or excess reserves indicating an investment character. The two-year holding rule under s.106 continues to apply unchanged.

The publication considers this an under-discussed area. The boundary cases are individually material to specific estates, and the case-law guidance is fact-specific rather than producing bright-line rules. Practitioners advising on succession should consider the trading-investment classification carefully where the company holds substantial reserves.

The AIM-listed shares change

AIM-listed trading-company shares previously qualified for 100 per cent BPR under the same framework as unlisted shares. The reform reduces this to 50 per cent relief from the first pound, with no allowance. The effective rate is 20 per cent on the full market value of qualifying AIM holdings above the nil-rate band.

This is a more straightforward change than the unlisted-share change because AIM shares are liquid and the SAV negotiation does not arise — market price applies. For AIM-focused estates, the practitioner conversation is largely about portfolio rebalancing, charitable giving strategies, and lifetime planning rather than about valuation disputes or instalment funding.

Trust and lifetime-planning interactions

The reform's £2.5m allowance refreshes every seven years for individuals (ten for trusts under IHTA 1984 Part III), creating a meaningful planning window for clients who can structure lifetime gifts. Discretionary trusts established before death and funded with qualifying business property within the seven-year window can preserve the original BPR position for the assets transferred. This is open under the rules as drafted and is being actively used in practice.

Anti-forestalling provisions were considered during the legislative process but do not appear to have been introduced in the form some commentary anticipated. The TIIN is silent on aggressive structuring and HMRC's published anti-avoidance position does not currently extend to ordinary planning use of the allowance refresh.

Practitioners should expect significant client interest in pre-death planning during the next several years. The publication's substantive view is that planning of this kind is open under the rules and that ordinary tax planning advice continues to apply. Whether the planning use produces a meaningful gap between forecast and realised receipts is one of the open empirical questions the post-reform data will eventually resolve.

The open questions a practitioner is likely to be asked

Three questions come up repeatedly in client conversations and the publication's view is that practitioners should be ready to answer all three with care.

"Will the rules change again?" The £2.5m allowance was lobbied up from the original £1m on 23 December 2025. Further changes are not announced but cannot be ruled out. Practitioners should advise based on the rules as drafted while noting that the legislative position has been actively contested and may be adjusted further.

"Should I leave the UK?" Not a question for tax practitioners to answer as a personal-decision question. The technical answer — what the rules permit, what residence planning would look like, what the long-term-resident framework requires — is within scope. The personal-decision question is not. Where clients press for it, the publication's view (set out in the founder-specific piece) is that leaving is not always a winning move financially after costs, and that the question deserves more engagement with the question than most clients give it.

"Is this fair?" Beyond the practitioner's professional remit. Where clients ask, the publication's substantive view is in the principle piece: the principle of the reform is right, the mechanism for the unlisted-shares case is contested, and the answer to the mechanism question is evidence rather than rhetoric. Practitioners can point clients to the publication if they want the substantive engagement, while staying within their professional remit on the technical advice.

What the publication is offering practitioners

The publication is not advising on specific cases. It is offering the substantive engagement with the reform's contested issues that the practitioner explainers, by the nature of their format, do not provide. The interactive financial model at /uk-tech-iht-model.html may be useful for client conversations about the magnitude of the issues. The principle piece, the readable piece, and the funding-stack piece offer the substantive analysis at increasing levels of depth.

If you find errors in the technical statements above, the publication would rather be corrected than carry the errors forward. The author is a founder rather than a tax specialist, and AI tools were involved in producing the analysis — both facts that argue for cautious use of the publication as a primary reference and for active correction by readers who know more.

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Written by Claude (Anthropic). The technical statements above are anchored to legislative and case-law citations as referenced. About 2,800 words. Doug is a UK tech founder, not a tax specialist; the publication is not a substitute for professional advice on individual cases.