The fundamentals of trusts: An aide-memoire ahead of key changes to the Business Relief regime in April 2026

The rules on Business Relief are set to change substantially in April 2026.  The result is a ‘now or never’ opportunity for clients to transfer qualifying assets into trust without immediate inheritance tax consequences.

You are likely to be aware of the changes from commentary in the press and legal industry – find out more from us.

We have seen a substantial increase in clients enquiring about setting up trusts in the context of the changes. The technicalities of Business Relief are complex and it is worth stepping back to look at the fundamentals of trusts to lay the foundations for further conversations on the opportunity which arises before April: what exactly is a trust, how does it work, and why has it been such a cornerstone of family wealth planning for centuries?

What is a trust?

A trust is a legal arrangement that separates the ownership and control of assets.  One or more trustees hold and manage those assets for the benefit of identified beneficiaries.  The person who creates the trust by transferring assets into it is known as the settlor.

The trustees become the legal owners with control of the assets and are responsible for managing them in line with the terms of the trust.  The beneficiaries are the beneficial owners who may benefit from the income or capital from those assets, either immediately or in the future, depending on how the trust is structured.

This separation can appear abstract, but trusts are used every day, not just for wealth protection, but also in pensions, charities, and even property co-ownership.  Wherever there is a need to hold and manage assets on behalf of someone else.

A trust is usually created by a trust deed, or by will, which sets out the rules – who the trustees and beneficiaries are, what powers the trustees hold and how income or capital can be distributed.

Broadly there are two types of trust: a discretionary trust where the trustees are given wide flexibility in the exercise of their powers and no one has an entitlement to any particular asset or particular percentage share of the trust.  The other is a life interest trust (usually created on death) where a named person is entitled to receive all income from the trust assets during their life.

There are many ways in which the terms of a trust can be tailored to suit the particular circumstances and the right structure depends on your specific objectives.

Common reasons to use a trust

A trust can play an important role in the protection of family wealth.  The separation of ownership and control provides a barrier which can shelter assets from events such as a divorce or bankruptcy within the family.

A trust also allows you to retain future control over who benefits from them and when.  This is especially valuable where the settlor wants to provide for family members who may not yet be ready to manage significant wealth responsibly or where the settlor wishes to defer the decision of who benefits and in what proportion to a future date.

For example, rather than leaving large sums outright to children or grandchildren, assets can be held in trust and distributed at appropriate moments for education, housing or business ventures under the trustees’ supervision.  This ensures that wealth supports and empowers future generations, rather than burdening them.

Families change, priorities shift and personal circumstances evolve.  Trusts can give the flexibility needed to protect wealth while creating a structure which can adapt over time.

The April 2026 deadline

Trusts have long played a crucial role in tax-efficient succession planning but one such advantage of trust structures is set to be removed from 6 April 2026.

Under current legislation, Business Relief can act to reduce the value of qualifying business assets for inheritance tax purposes by 100% or 50%.  Relief applies to lifetime transfers, including transfers into trust, or on death.

That means that a business owner can currently settle qualifying assets into trust during their lifetime without an immediate inheritance tax charge.

However, from 6 April 2026, 100% Business Relief will be capped at £2.5 million per person. Above this threshold, Business Relief is limited to 50% and a 10% inheritance tax entry charge would apply to any transfers of qualifying assets into trust.  For more information on the changes see our B(e) PR(epared) article.

Should you act now?

Acting now can help business owners bank the full relief under current rules without incurring the inheritance tax entry charge that will apply from 6 April 2026.  This benefit is on top of the established advantages of trusts such as providing a balance of long-term flexibility with continued control of family wealth.

The changes are prompting business owners to review current ownership structures to mitigate potential future tax charges.  There is no ‘one-size-fits-all’ solution and there are other options which we can explore if a trust is not right for you.

What we can do

Our Private Wealth team can help you:

• Assess your exposure under the new rules.
• Explore trust and gifting strategies.
• Review existing trusts and succession plans.

If you would like to discuss how a trust might fit within your family wealth or business succession plan, or how the upcoming changes could affect your existing arrangements, our private wealth team would be pleased to advise.