Over the past two months, we have looked at the Business Relief (BR) reforms that took effect from April 2026, and the pension inheritance tax (IHT) changes coming in April 2027, which you can find here and here. Each of those changes, taken in isolation, alters how advisers approach estate planning. Taken together, they reshape the framework more fundamentally.

This final piece is about what advisers can do with that. It looks at where BR and Venture Capital Trusts (VCTs) still have a meaningful role to play, and how planning might start to come together in practice.

Where Business Relief still fits

Despite the reforms, BR retains the features that have made it useful in estate planning. Unlike gifting strategies, it does not require clients to survive for a further seven years after a transfer is made, and unlike many trust structures, it does not require them to give up ownership of the underlying assets. Provided the qualifying conditions are met and the assets have been held for two years, relief can apply while the client retains full ownership.

In a planning environment that is becoming more constrained, that combination of flexibility and accessibility remains genuinely valuable.

What has changed is how BR needs to be used. It is no longer a broad, open-ended solution, but a more deliberate allocation decision that sits within a defined framework and needs to be considered alongside the rest of the estate.

The £2.5m cap on 100% relief introduced from 6 April 2026 means that sizing matters in a way it did not before. The addition of pension wealth to the taxable estate from 2027 means that, for many clients, the overall estate is larger than expected. Together, those two changes make it more important to decide not just whether BR is used, but how much of it is used, and where.

For clients with larger or more complex estates, a professionally managed approach may be worth exploring. A discretionary portfolio through a service such as the ProVen Estate Planning Service (PEPS) can provide access to BR-qualifying unquoted UK trading companies, offering diversification and ongoing governance within a structure designed specifically for estate planning. As always, eligibility for BR is not guaranteed and depends on the qualifying status of the underlying companies at the time of claim, prevailing legislation, and individual circumstances.

Where VCTs fit into this conversation

VCTs sit in a different part of the planning conversation, and it is worth being clear about that distinction.

They do not offer IHT relief, so they are not a substitute for BR. Their role is more specific. They can help manage the income tax consequences of drawing pension wealth earlier than originally planned.

Since 6 April 2026, investors can claim up to 20% income tax relief on VCT subscriptions of up to £200,000 in a tax year, and dividends paid by VCTs remain free of income tax.

In planning terms, VCTs can be used to soften the income tax impact of pension withdrawals. They can also provide tax-free dividend income, although dividends are not guaranteed. Where income is received, itmay support a regular gifting strategy, provided the conditions for normal expenditure out of income are met and properly documented.

How this might look in practice

The following scenarios are illustrative only and are intended to bring some of these considerations to life rather than represent specific advice. All figures are simplified and ignore investment growth, fees, the spouse exemption, charitable relief, RNRB downsizing rules, and detailed trust charging.

Harriet - drawing pension wealth earlier and managing the tax cost

Harriet is 66 and single. She holds a £900k Defined Contribution pension and £400k of other assets, giving her a total estate of around £1.3m under the 2027 rules, which is a meaningful change from her current position.

With appropriate advice, one approach Harriet might consider is drawing a portion of her pension earlier than planned and using VCT subscriptions to offset some of the income tax that arises on withdrawal. Any tax-free dividends generated by the VCT could then support a regular gifting strategy, provided the conditions for normal expenditure out of income are met and the necessary records are kept.

Over time, VCT proceeds could potentially be recycled into BR-qualifying assets to build IHT relief, subject to the two-year qualifying period and the relevant conditions being satisfied at the time of claim.

The sequencing here is important. VCT income tax relief requires shares to be held for a minimum of five years, and BR relief requires a two-year holding period with ongoing qualifying status. Neither is immediate, and any strategy that uses both needs to reflect that.

Lena - navigating the RNRB taper after pension inclusion

Lena is 73 and widowed. She holds a £650k home, £1.05m of investments and a £900k pension, along with transferred NRB and RNRB from her late husband. Under the April 2027 reforms, her estate for IHT purposes would be around £2.6m, which places her well into the range where the RNRB begins to taper.

A point that is often overlooked in cases like this is that holding BR-qualifying assets will not, by itself, bring the estate below the £2m taper threshold. BR reduces the IHT due on qualifying assets, but it does not reduce the headline estate value used to calculate how much RNRB is available.

To restore access to the RNRB, the estate itself needs to be reduced, which generally requires lifetime transfers. Gifts made during a person’s lifetime fall outside the estate for taper purposes in a way that simply holding relievable assets does not.

There are structures where BR and trust-based planning can work together to achieve this, but the sequencing is precise and the conditions matter. This is an area where detailed advice is essential.

What advisers should be thinking about now

With the BR reforms now in effect and the pension changes on the horizon, the next twelve months represent a useful window to review client positions before the full framework is in place.

The clients most worth identifying first are those whose pension wealth will materially change their IHT profile from 2027, particularly where large Defined Contribution pensions sit alongside relatively modest non-pension assets. For clients with existing BR exposure, it is worth reviewing whether current allocations make effective use of the £2.5m 100% relief allowance, especially where total estate values are expected to increase.

Across all of this, estate liquidity is likely to become more important. Personal representatives will face reporting and payment responsibilities for pension-related IHT from 2027, which introduces a practical consideration alongside the planning itself.

These reforms do not remove the tools available to advisers, but they do change how those tools need to be used. Planning becomes less about broad strategies and more about sequencing, allocation and timing.

For advisers who engage with this early, there is a clear opportunity to add value for clients whose position may be changing more significantly than they realise.

If you would like to discuss how these changes may affect your clients, please contact us on 020 7845 7820 or info@beringea.co.uk.

The explanation of tax rules set out in this article has been written in accordance with our understanding of the law and interpretation of it at the time of publication. It is not our intention to offer legal, tax or investment advice, and we always recommend that investors seek professional advice that can take account of their personal circumstances before making any investment or estate planning decisions.

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