UK Tech and the IHT Reform — Plain English Overview

The shortest readable version. About 700 words.

The change

From 6 April 2026, if you die owning shares in a private trading company worth more than £2.5 million (as a single person — £5 million for a couple, since the allowance transfers between spouses), your estate now pays inheritance tax at an effective 20 per cent rate on the excess. Before April 2026, this kind of asset passed tax-free under a relief called Business Property Relief. The reform caps that 100 per cent relief at £2.5 million per person; above that, only 50 per cent relief applies, taxed at the standard 40 per cent rate. Tax due can be paid in ten annual instalments, in equal instalments over 10 years, interest-free.

HMRC's December 2025 estimate is that around 1,100 estates will pay more inheritance tax in 2026-27 as a result of the wider reforms — covering farms, family businesses, and private company shares. The specific cohort this piece focuses on, BPR-only estates holding qualifying unlisted trading-company shares, is around 220 of those. The wider planning population whose lifetime decisions are affected runs to several thousand households.

Why it is contested

The principle of taxing very large private holdings at the point they pass between generations is not really in dispute. Most comparable countries do something similar. What is in dispute is the way the tax is collected.

The current method requires HMRC to value the shares at the date of death — but private company shares have no observable market price, so the valuation is negotiated, often over years. The asset is illiquid, so the tax has to be paid out of borrowing or eventually a forced sale. And the people most affected, usually founders or families who built the business, can leave the UK before they die — which is why this is now actually happening.

Three views

Three serious positions are being argued by knowledgeable people.

Hold the system, fix the rough edges. Keep tax-at-death. Adopt four practical fixes everyone agrees on. Resource HMRC to handle disputes. The affected group is small; mechanism change for one asset class would be a special carve-out for the wealthiest. The strongest version of this position goes further: it points out that the argument that this particular tax is uniquely unfit for this particular asset class is the same argument that advocates of every tax on the wealthy have always made — and the historical record is that those arguments are usually overstated.

Change how the tax falls. For private company shares specifically, replace tax-at-death with capital gains tax when the heir actually sells, paid out of actual sale proceeds. Australia has run a comparable regime for forty years. Removes the worst features of the current rules, but with a structural complication few people are talking about: if the tax is deferred until the heir sells, the state effectively becomes a long-term contingent equity holder across hundreds or thousands of UK private companies — economic exposure without governance, selected by which founders happen to die holding what. That is a meaningful shift in the relationship between state and private business, and it has not been deliberated as such.

Adopt the fixes, defer the bigger decision. Do the four fixes everyone agrees on, commission proper modelling, decide on the mechanism question later. The strongest version of this commits to switching to the second option if the evidence at a defined review point shows the current rules are not working.

All three positions accept the principle of the reform. All three support the four practical fixes — closing a borrowing-based avoidance route, publishing a valuation methodology, tightening rules on temporary non-residence, and clearer guidance on company buy-backs. The disagreement is whether those fixes are enough on their own.

What is already happening

The behavioural response started when the reform was announced in October 2024, eighteen months before it took effect. The Office for Budget Responsibility — the official UK fiscal watchdog — assumes 25 per cent of the most affected non-doms will leave the UK as a result of the related non-dom reform (a different reform from this one, on a different population). That figure is the central assumption in the Treasury's own scoring document for the non-dom reforms. It tells us double-digit departure rates are considered plausible by HMRC for highly mobile wealthy populations under tax reform; it does not directly tell us what will happen to the BPR cohort, whose mobility characteristics are different.

The Financial Times analysed the public Companies House register and found that 3,790 UK company directors changed their primary residence to abroad between October 2024 and July 2025 — a 40 per cent increase on the previous year, with a sharp spike in April 2025 coinciding with the non-dom reform's effective date. About 150 of those who left in spring 2025 went specifically to the United Arab Emirates. This figure is much larger than the BPR cohort and reflects a broader behavioural environment driven by multiple tax changes (non-dom, capital gains, carried interest, this one), not the BPR reform alone. What it shows is that wealthy UK residents in director-class roles were relocating in significantly higher numbers than usual; what it does not show is how much of that is attributable to BPR specifically.

Named tech-sector departures and planned departures (the founder of Revolut, who has registered UAE residency; the co-founder of Improbable, who has been reported as preparing to emigrate citing a mooted exit-tax rather than the BPR reform specifically) are illustrative rather than evidential — wealthy people sometimes move, three named cases do not establish a rate, and not all of those cases are responses to the BPR reform. The widely-cited figure of 16,500 millionaire departures published by Henley & Partners has been forensically critiqued by independent tax-policy researchers and should not be cited as evidence; the OBR figure and the Companies House data are the more credible sources, with the caveats above about what each can and cannot tell us.

What this means

Several things are true at once. The reform is defensible in principle. The mechanism it uses produces real operational problems for one asset class. People who can leave the UK to avoid the regime are doing so in observable numbers. Whether the leakage is small enough to absorb or large enough to undermine the regime is not yet known with confidence.

Serious people will reach different conclusions about the right answer with the same evidence. That is not a failure of analysis; it is what the question actually looks like at this stage.

If you want to go deeper

The longer plain English version walks through the same content in more depth, including the five empirical questions the disagreement turns on, the four scenarios for how this could play out, and the comparison with how Australia, Canada, the United States, Germany, and France handle similar questions. The article in its tax-policy register and the policy options paper provide the same analysis at higher technical depth.

The political piece sets out what this looks like as a political problem. The honesty piece sets out where the public debate is currently misleading and which figures should not be trusted. The methodology piece explains how this analysis was made and why it carries the disclosures it does.

None of those pieces will tell you what to think. The author is personally affected by the reform and is open about that. The work tries to give you the materials to think it through for yourself.