The Business Owner Brief: Navigating Change with Confidence
Business owners are facing one of the most complex tax and financial planning environments in years - rising employment costs, frozen tax thresholds, and major tax and relief reforms from 2026…as well as the fundamental pensions and IHT reforms kicking in from 6 April 2027. But with change comes opportunity.
This edition focuses on what really matters now: how to secure a financial planning opportunity from the employer NIC rise, prepare early for the new Business Property Relief (BPR) rules, and make sure liquidity never becomes a legacy problem.
As always, our goal is simple - to help you see what’s coming, understand what it means, and act with confidence in relation to your financial plan.
Explore NIC Strategies
Employer NIC
Opportunity 1
From Burden to Benefit: Securing benefit from the Employer NIC Increase
The Challenge
Employer NICs have risen after the October 2024 Budget — adding direct cost pressure to companies and shrinking post-tax income from employment for shareholder-directors and employees.
Directors taking salary or bonuses now face a double hit: higher employer NIC contributions and frozen income tax thresholds and allowances that push more income into higher-rate and additional rate tax.
From April 2025, the main rate of employer National Insurance contributions rose from 13.8% to 15% on earnings above the secondary threshold. The employer's secondary threshold fell to £5,000 p.a., so NIC now starts sooner than before.
The Opportunity
Salary-sacrifice pension funding can help to ameliorate the impact of these changes for funds that are not required by directors for current expenditure — cutting employer NIC by up to 15% and extracting company profits more efficiently for future use by directors / employees.
And, as well as this, for shareholding directors, a careful review of how to remove available funds from the business — salary/bonus, dividend or pension contribution, possibly via salary sacrifice/exchange — is an essential issue that you need to discuss with your professional advisers.
Immediate Action:
Review your remuneration mix before 5 April 2026 (and possibly before the Budget on 26th November this year) and where appropriate in relation to funds not needed for immediate consumption, to re-route part of salary/bonus into employer pension contributions under effective salary-sacrifice agreements.
Understanding the NIC Changes: What Every Business Owner Must Know
Higher Employer Costs
Every £10,000 of extra gross pay now triggers £1,500 of employer NIC (previously £1,380)
Dividend Alternative
Dividends avoid NIC altogether but are taxed at 8.75/33.75/39.35% and paid from post-corporation-tax profits
Pension Advantage
Extracting value as employer pension contributions remains corporation-tax-deductible and free of employer NIC
For owner-managed businesses, the NIC changes need to be carefully factored into the economics of remuneration planning. The employee NIC rates remain 8% and 2%, but thresholds are frozen for both income tax and NIC — so fiscal drag pulls more income into charge. Together, these moves increase the effective tax drag on earned income by around 2–3 percentage points for many directors.
Why it Matters
In relation to corporate funds that are to be extracted from the business, but which are not required for immediate personal expenditure, channelling those funds into a registered pension can make real sense. The latest NIC changes further increase the value of salary sacrifice and employer pension contribution as opposed to employee contribution, especially where the employer agrees to contribute their NIC saving to the pension too.
The Power of Salary Sacrifice: Real Numbers That Matter
How It Works
Contributions paid out of an employee's after-tax pay are less attractive as the employee (and their employer) will have paid NI contributions on the gross income received. If instead the employee/director agrees with their employer to sacrifice salary/bonus equivalent to the desired pension contribution, significant advantages emerge when that amount is paid as an employer contribution.
These fundamental attractions will be available regardless of the individual's tax rate.
Detailed Example: 40% and 45% Taxpayers
This example shows the amount of contribution that could be paid (for the same employer net cost) either as a direct employee contribution or via salary sacrifice, assuming the employer is prepared to increase the salary sacrifice pension contribution by their 15% NI contribution saving. Based on £1,000 gross salary (and assumes Annual Allowance is not an issue):
A taxpayer could also see benefits in terms of reducing or eliminating the high-income child benefit charge on income above £60,000. For taxpayers with income between £100,000 and £125,140, salary sacrifice planning can also be used to reclaim the personal allowance in addition to the income tax and NI savings. In all cases, financial advice is essential to ensure optimum outcomes.
Strategic Planning Actions: Your Complete Roadmap
1
Salary-Sacrifice Review
Consider redirecting part of your salary/bonus not needed for imminent expenditure into employer pension before bonus-award date. Saves 15% employer NIC + employee NI/tax and is fully CT deductible.
2
Use of Carry-Forward
Utilise up to three years' unused Annual Allowance for larger one-off contributions. Enables potentially material pension funding without an annual allowance, NIC or other tax charge.
3
Director's Spouse Scheme Membership
Consider spouse/director with lower income for parallel contributions. Household AA = £120k + carry-forward.
4
HICBC Mitigation
Reducing Adjusted Net Income via sacrifice can preserve Child Benefit and Personal Allowance. Two-child family can retain ≈£2,252/yr of Child Benefit if ANI is kept ≤£60k.
5
Exit Strategy
For those planning to sell or wind down, use final-year pension contributions pre-sale to extract profits NIC-free. Converts taxable profit into pension wealth efficiently.

Critical Timing: A review of the potential benefits that salary sacrifice can deliver ahead of the Budget could be worthwhile. The possibility of some further NIC change limiting the NIC saving benefit of salary sacrifice has been put forward by some think tanks as being something the government should consider in the upcoming Budget.
Business Property Relief ( BPR)
Opportunity 2
The New BPR Rules: Protecting Your Business and Your Family's Cashflow
From 6 April 2026, a new £1m "100% relief allowance" will apply across BPR and APR (Agricultural Property Relief) combined. Qualifying value above £1m secures 50% relief (resulting in an effective 20% IHT rate), not 100%. For shares traded on — but not "listed" on — a recognised stock exchange (e.g. AIM), BPR qualification will be limited to 50% of the value of the qualifying asset with no £1m allowance. These shares, however, will not "count" towards the £1m allowance for other BPR/APR qualifying property.
What's Changing
  • £1m 100%-relief allowance across combined APR+BPR; excess receives 50% relief
  • AIM/"not listed" shares: 50% relief (not 100%) on qualifying shares
  • Trusts: separate £1m allowance subject to anti-fragmentation rules
  • Instalments: IHT on all qualifying property can be paid interest-free over 10 years
  • Indexation: from 6 Apr 2030, allowance uplifted by CPI
What's Not Changing
  • The BPR trading test ("wholly or mainly trading" threshold—practically >50% trading) is unchanged
  • APR fundamentals remain (relief by reference to agricultural value, not open-market value)
  • HMRC's long-standing definition of agricultural value still applies
The core qualifying tests are not being tightened (e.g. there's no new "80% trading" requirement for BPR). The reform changes how much relief you get, not the trading test itself. The ability to pay IHT in Instalments is retained for BPR qualifying investments regardless of the rate of relief the asset qualifies for. IHT on property eligible for APR/BPR can be paid in 10 equal yearly instalments, interest-free, but the first instalment is still due by the end of the sixth month after death — so executors are going to continue to need cash relatively quickly.
Why the BPR Changes Matter: Real-World Impact
1
Bigger Cheques on Death for Larger Estates
A comparison of the IHT liability resulting from a shareholders death and transfer of their £5m unquoted shares to other than a surviving spouse: today there would likely no IHT as all of the shares would qualify for 100% BPR; From 06.04.2026: £1m at 100% relief + £4m at 50% relief ⇒ £2m taxable ⇒ £800k IHT at 40% (before applying NRB/RNRB/other exemptions). For AIM holdings, the whole value would generally qualify for BPR at 50% (subject to conditions) whereas for transfers made before 06.04.2026, 100% relief applies if the holding qualifies.
2
Married Couples Must Plan to Use Two Allowances
The £1m allowance is not transferable, but each spouse gets their own allowance. With nil-rate bands, a couple could pass up to £3m tax-free to the next generation between them if the allowances are fully used — but only with careful will structuring so you don't waste an allowance on the first death.
3
Liquidity Still Bites — Even with Instalments
Instalments reduce financing cost, not the need for cash on day one — the first instalment falls due by the end of month six after death. Illiquid estates (private companies, farmland) may still need dividends, borrowings or sales to fund the initial payment.
For all of the above professional financial advice is essential to fully capitalise on the reliefs available …. they're not easy to navigate .
Action Check-List for Business Owners: Three Critical Steps
1
Map Your Exposure
Segment holdings into: 100%-qualifying up to £1m, 50% thereafter, and AIM/"not listed" shares at 50%. Run "first-death/second-death" models to ensure you are clear about potential liabilities and together with those responsible for your financial plan, expose opportunities to plan to minimise IHT through maximising relief.
2
Don't Rely on Pre-2026 "Work-Arounds"
Anti-forestalling applies to lifetime transfers on/after 30 Oct 2024 where death is on/after 6 Apr 2026 (within seven years). Trust planning remains valuable but the anti-fragmentation rules are likely to prevent you completely sidestepping the new cap. There was a significantly material consultation on BPR and trusts - the outcomes of which are, by now, well known.
3
Plan to Provide Liquidity: Life Insurance in Trust
Use whole-of-life cover sized to the expected IHT liability. and on a single or joint lives basis - as appropriate. Write the policy in trust so the proceeds will be outside of the deceased's estate and available quickly (by-passing probate) to pay the first and subsequent instalments. Where appropriate, fund premiums using the "normal expenditure out of income" exemption so the payments are immediately outside of the estate — but keep records and ensure the premiums (taking one year with another) are made out of income; and that, after allowing for all transfers of value forming part of their normal expenditure, the transferor is left with sufficient income to maintain their usual standard of living.
Case Study: Sarah's Estate Planning
Sarah, a widow, owns unquoted trading company shares worth £2m (qualifying for 100% BPR today) and other assets worth £2m. She "inherited" her deceased husband's nil rate band and residence nil rate band…but neither her own or her husbands " inherited " RNRB are available due to the size of the deceased's estate.
Before 6 April 2026
  • Estate: £4,000,000
  • Less BPR qualifying property: £2,000,000
  • Less 2x NRB: £650,000
  • Subject to IHT: £1,350,000
  • IHT @ 40%: £540,000
  • Net for beneficiaries: £3,460,000
After 6 April 2026
  • Estate: £4,000,000
  • Less BPR qualifying property: £1,500,000
  • Less 2x NRB: £650,000
  • Subject to IHT: £1,850,000
  • IHT @ 40%: £740,000
  • Net for beneficiaries: £3,260,000
Reduction in net estate from the BPR limitation: £200,000
A life policy in trust pays £200k+, executors can meet the first instalment by month six and spread the rest over nine years interest-free. Premiums would usually be exempt under the normal expenditure exemption.
If appropriate and affordable the beneficiaries under the trust could take over premium payments.
What Business Owners Are Thinking & Doing
Opportunity 3
What UK Business Owners Like You Are Doing: Research Insights
Based on new research* with 300 UK business owners, this section reveals what your peers are doing right now — and how they're planning for the changes ahead. Research sample: UK owner-managers, businesses valued £1m+.
Remuneration Reset: Salary Sacrifice Goes Mainstream
Three in four owners (76.7%) say they'll introduce salary sacrifice this year to counter Employer NIC at 15% and frozen tax thresholds. Nearly half (48.0%) will lift employer pension contributions and trim cash bonuses, while only 9.0% plan no change. Crucially, 56.5% of those adopting sacrifice will add the employer's 15% NIC saving into staff pensions — maximising the uplift. Accountants lead the implementation list (79.3%), followed by financial planners (64.3%).
76.7%
Adopting Salary Sacrifice
Business owners implementing salary sacrifice in 2025
56.5%
Adding NIC Savings
Those contributing employer's 15% NIC saving to pensions
48%
Adjusting Mix
Lifting employer pension contributions and trimming bonuses
"If your business is carrying pay-roll drag, a prospective, documented salary-sacrifice agreement is the cleanest fix. It removes employee NIC and income tax on the sacrificed slice and avoids employer NIC — often beating both bonus and dividend extraction for funds you don't need personally today."
Quick win: If you're adopting sacrifice, tell payroll to add the 15% employer NIC saving to the pension contribution by default. Over half of your peers are doing exactly that.
*This is example Pulse data is generated by our proprietary Business Owners Avatar. Once live Pulse data will be driven by Rathbones owned research we will run.
APR/BPR 2026: Awareness Gaps and Day-One Cash Risk
From 6 April 2026, APR/BPR reforms reshape how much relief you get and how estates pay. Owners are alert but patchy on detail:
  • 56% correctly identify the "£1m at 100% then 50% above" structure
  • 49% know AIM/'not listed' shares sit at 50%
  • 49% know 10 annual, interest-free instalments are available if paid on time
  • Only 40% know the first instalment is due by the end of month six after death
  • Composite knowledge (both £1m cap + AIM-50%) sits at 26%
43%
Have Immediate Plan
57%
Face Funding Gap
Liquidity Reality
Asked how they'd fund the first IHT instalment, 43% have an immediate plan (cash reserves 24% or life policy in trust 19%). That leaves 57% facing a day-one funding gap — despite the 10-year interest-free schedule. Larger businesses are better prepared, but even at £25m+, half will still scramble without proactive planning.

Critical insight: Instalments reduce financing cost — not the need for cash by month six. If you hold illiquid private shares or land, you need a liquidity line (policy in trust, facility, or cash buffer) that doesn't starve the business of working capital.
Insurance-in-Trust: Rapidly Becoming the Default Solution
Adoption is strong already: 34% have policies in trust in place; another 43% are actively considering one in the next 12 months. Among those with cover/intent, 69% size the policy to the 10-year instalment stream, 39% to the full projected IHT, and 23% to the first-year instalment. Owners with AIM exposure are notably more likely to have (or plan) cover.
1
Current Adoption
34% have policies in trust already in place
2
Next 12 Months
43% actively considering implementation
3
Total Coverage
76% will have protection within one year
Why This Works
A policy written in discretionary trust sits outside the estate and bypasses probate, so trustees have cash fast to meet the month-six payment and the remaining nine instalments — without forcing asset sales or dividend raids at a bad time.
Estate Protection
Policy proceeds sit outside the estate, avoiding additional IHT liability
Fast Access
Bypasses probate for immediate liquidity when needed most
Business Continuity
Prevents forced asset sales or dividend raids during vulnerable periods
Five Moves to Model from the Front-Runners
Lock in Salary Sacrifice (Prospectively)
Redirect part of salary/bonus into employer pension contributions and add the 15% NIC saving to the pot. Paper the change before entitlement arises; align payroll, contracts and insured-benefit bases.
Use the Allowances — Properly
Annual Allowance £60k, taper/MPAA permitting; carry-forward three years for six-figure funding. If you're reclaiming Child Benefit or the Personal Allowance, sacrifice can help by cutting Adjusted Net Income.
Map Your APR/BPR Exposure
Tag holdings by 100% up to £1m vs 50% thereafter, and ring-fence AIM/'not listed' positions that will sit at 50%. Model first-death/second-death and ownership splits to avoid wasting the £1m per person.
Fund Month Six — Without Starving the Business
Decide now whether cash reserves, a policy in trust, or a facility will fund the first instalment. If using insurance, specify sum assured (full liability vs 10-year stream) and write the policy in trust; register/maintain on TRS.
Coordinate the Paperwork
Update wills, trusts, shareholder/cross-option agreements and board policy on remuneration and distributions to reflect the new plan. Get your accountant (modelling, payroll, NIC/CT interaction) and solicitor (trusts, contracts) in the same room.
A Call to Action
Every change brings both challenge and opportunity. The most successful business owners act before the rules change — not after. Now is the moment, along with your financial professional, to review your structure, your remuneration strategy, and your succession plans to stay one step ahead.
Speak to your adviser to ensure your next move keeps you — and your business — in control.