The new £2.5m BPR allowance: Opportunities and shareholder risks

In December 2025, the Government announced that the allowance for business property relief (BPR) would increase from £1 million to £2.5 million. In Business & Accountancy Daily, Senior Associate, James Woods-Davison explores how this change creates new opportunities for inheritance tax planning.

He explains that because the allowance applies to both individuals and trustees, there is renewed interest in restructuring business ownership into multiple shareholdings to maximise relief. However, he cautions that this tax advantage should not be pursued in isolation: businesses must consider whether such restructuring might undermine operational stability or introduce new governance challenges. He notes that even decisions that previously felt routine for a founder may require greater scrutiny and justification once shareholdings are divided.

James highlights that the introduction of additional minority shareholders can have unintended consequences. While a founder retaining majority control may feel protected, minority shareholders hold meaningful legal rights, particularly the ability to bring unfair prejudice claims under section 994 of the Companies Act 2006. He explains that these claims can be triggered when a minority shareholder feels they have been treated unfairly, with courts empowered to order a buyout of their shares at a fair value. He also stresses that the grounds for such claims often cut to the heart of a business’s operations, including dividend policies, executive remuneration, information‑sharing, and whether value or contracts have been diverted elsewhere. Even the threat of litigation, he notes, can create reputational, financial, and operational disruption due to disclosure obligations and the public nature of court proceedings. Such claims may also force a business to deploy significant liquidity or borrow to fund a court‑ordered buyout.

To mitigate these risks, he urges founders considering share reorganisation to invest in robust corporate governance. This includes ensuring that decisions can be objectively justified and properly documented, especially those historically made unilaterally by a founder. He notes that directors’ and officers’ insurance can help with legal costs, and that using trusts to hold minority shareholdings may add an additional protective layer, though this is not without its own vulnerabilities. He cautions that trusts can themselves become contentious if relationships between trustees and beneficiaries deteriorate.

Ultimately, he concludes that while the enhanced BPR allowance presents a significant opportunity for succession planning, it must be balanced with thoughtful management of shareholder relations and long‑term business stewardship. Strong governance, he suggests, is what allows businesses to preserve value across generations

The full article was first published by Business & Accountancy Daily  in February 2026.