Business Protection – Planning for the known and unknown

Published in Business Eye in May 2025. 

When business owners think about protecting their company, they usually think of public liability insurance and protecting physical business assets such as their business premises, contents, vehicles, key equipment and stock. Yet despite putting insurance and contingency plans in place for physical business assets many companies have not considered protecting their most valuable and key assets - their people. People are at the heart of every business and are responsible for its success so the unexpected loss of a key person or owner through death or critical illness is likely to have a significant impact on its ability to continue trading profitably or at all.

It is important to consider the financial impact on your business should the worst happen. What provisions do you have in place to protect your profits? What happens to the ownership of the business if a shareholder dies? Would the company still be able to repay debts or director loan accounts? Would your business survive? Whilst no one can predict the future, having the necessary protection in place will help to ensure your business is not compromised and will provide crucial stability allowing your business to continue to flourish should the unexpected happen.

Business protection is designed to protect your company from the financial losses incurred if a key person or owner of a business should die or be diagnosed with a critical illness. Having the appropriate protection in place can help your business continue to trade and can assist financially in funding the replacement of key individuals, and the repayment of debt. It can also ensure funds are available to purchase shares from the deceased business owner’s estate, giving you added peace of mind that your business could live on.

Protecting your business has become ever more important following the significant changes introduced to Business Relief (BR) and Agricultural Relief in the Autumn 2024 Budget. From April 2026, the current 100% Inheritance Tax (IHT) exemption for BR & AR will be capped at £1 million per taxpayer. Any business assets over the new threshold will receive a 50% relief equivalent to a 20% effective IHT rate on death. The changes will have significant implications for many business owners and their families who will now need to consider their exposure to additional inheritance tax charges and the impact this has on their wider personal estate and succession planning.

At a time when many businesses are facing rising costs and other challenges, continuity and succession planning may not be high on the priority list, however the new £1 million cap will require business owners to reconsider their succession planning strategies and business protection needs as their families will potentially face unexpected IHT liabilities. The changes have led to significant concerns for business owners on how their estate will pay the IHT liability without having to sell business assets. The good news is that there are options available to manage this liability as part of a long-term strategy. A whole-of-life insurance policy placed in trust can be an effective way for a business to make provision over time to meet the potential IHT liability. This strategy can provide a valuable option to your beneficiaries mitigating the need to sell business assets or suffer additional stress in raising funds to pay the tax bill at what will already be an emotional and challenging time.

In summary, the changes announced by the Chancellor will have significant implications for many business owners and their families. However, there are options available to help reduce or mitigate the potential exposure to IHT. Business owners should act now to review their exposure and review their wider succession and estate planning needs.

To learn more about business protection and receive advice on how we can help you identify the right solutions for your business, contact us for more information.