Navigating the new inheritance tax landscape: What pharmacy owners need to know

Understanding the new inheritance tax rules and taking proactive steps is crucial to safeguard your business and family’s financial future

As pharmacy owners, you’re no strangers to the complexities of running a business. But recent changes announced by Rachel Reeves on 30 October 2024, regarding inheritance tax and Business Relief, have added a new layer of concern. These changes could significantly impact how you plan for the future of your business and your family’s financial security.

Understanding the Changes

Rachel Reeves’ announcement has introduced restrictions on Business Relief, a crucial component for many pharmacy owners when planning their estates. Previously, Business Relief allowed for a reduction in the value of a business when calculating inheritance tax, making it easier to pass on your pharmacy to the next generation. However, the new restrictions mean fewer businesses will qualify for this relief, potentially increasing the tax burden on your heirs.

Why This Matters to You

For pharmacy owners, your business is more than just a source of income—it’s a legacy. The new inheritance tax rules could mean that a larger portion of your estate will be subject to tax, reducing the amount you can leave to your loved ones. This change underscores the importance of proactive estate planning and understanding the new regulations to mitigate their impact.

Steps to Take Now

3. Review Your Estate Plan: With the new rules in place from April 2026, it’s crucial to revisit your estate plan. Ensure that your current strategy aligns with the updated rule changes to ensure nil rate bands and the £1m cap are being effectively utilised. I.e. transfers to surviving spouse on death might need to be revisited to ensure the IHT relief is being optimised.
4. Evaluate Your Business Structure: The structure of your business can influence your eligibility for Business Relief. Explore whether restructuring your pharmacy could help you qualify under the new rules.
5. Lifetime gifting: Generally, when you make outright gifts to individuals it is considered a potentially exempt transfer (PET) for IHT purposes. Should the donor live for at least 7 years after the date of the gift it becomes exempt.  When qualifying business assets are gifted, gift relief can also be available to holdover any gain made on the shares against the donee’s base cost for capital gains tax (CGT) purposes.  Care must be taken to ensure the relief is available, but gifts of business assets can be a very effective and tax efficient method of transferring wealth out of an individual’s estate.
6. Consider how an IHT liability might be funded – will financing be required, could life insurance be an option or will the business need to be sold.
7. Life outside of the UK – those who had contemplated leaving the UK at some point might want to accelerate those plans and revisit what the impact of such plans are alongside their broader succession plans.

The Road Ahead

While these changes present new challenges, they also offer an opportunity to reassess and strengthen your succession plans. By taking proactive steps now, you can ensure that your pharmacy business remains a valuable asset for your family, even in the face of evolving tax laws to secure your business’s future. Stay informed, seek professional advice, and take action to protect your legacy.

By Monica Daddar, Director and Howard Ledingham, Senior Manager at Evelyn Partners looking after Entrepreneurs, privately owned businesses and families.

Monica Daddar, Director, at Evelyn Partners

Howard Ledingham, Senior Manager at Evelyn Partners