Family Company Shares: How to Structure Ownership Tax-Efficiently in 2026

Many limited companies are set up quickly, with little thought given to the long-term tax and commercial impact of the share structure.

However, how shares are owned can have a significant effect on tax efficiency, succession planning, and control.

With recent tax changes—particularly around dividends and inheritance tax (IHT)—now is the time to review your structure.

Do you really need 100% ownership?

Many business owners assume that holding 100% of the shares gives them full control.

In reality:

• More than 50% → gives day-to-day control (e.g. dividends, director decisions)
• 75% or more → allows major decisions (e.g. changing company structure, liquidation)

This means you can retain control without owning everything.

Why sharing ownership can reduce your tax bill

Spreading shares across family members can significantly improve tax efficiency—particularly when extracting profits.

With dividend tax rates increasing from 6 April 2026:

• Basic rate: 10.75%
• Higher rate: 35.75%

It is more important than ever to:

• Utilise multiple personal allowances and tax bands
• Distribute dividends across family members where appropriate

This can reduce the overall tax paid on company profits.

Involving family members in the business

If adult children or family members are involved in the business, giving them shares can:

• Reward their contribution
• Motivate long-term involvement
• Support succession planning

It also helps align ownership with those actively building the business.

Gifting shares: Tax implications to consider

Gifting shares in a trading company is often tax-efficient—but must be handled correctly.

Capital Gains Tax (CGT)

Normally, gifting shares triggers a market value CGT charge.

However, holdover relief can apply, meaning:

• The gain is deferred
• No immediate CGT is payable
• The recipient inherits the base cost

Inheritance Tax (IHT)

A gift of shares is usually a potentially exempt transfer (PET):

• No IHT if the donor survives 7 years
• If not, the gift may become chargeable

Important change: New BPR rules from April 2026

From April 2026, Business Property Relief (BPR) is changing:

• 100% relief will be capped at £2.5 million per shareholder
• Any excess will only receive 50% relief

This means:

Larger shareholdings could face increased IHT exposure

As a result, many business owners are now considering earlier share transfers to family members.

What happens if the donor dies within 7 years?

If a gift fails (i.e. the donor dies within 7 years):

• The new BPR rules apply (from 2026 onwards)
• Shares above £2.5m may only get 50% relief
• This could result in an effective IHT charge of around 20%

This makes timing and planning even more important.

Spouse transfers: A simpler option

Transfers between spouses or civil partners are much simpler:

• No CGT (no gain/no loss)
• No IHT (spouse exemption)

This makes them a useful first step in restructuring ownership.

Avoiding unexpected income tax charges

In most family situations, gifting shares does not trigger an income tax charge, due to exemptions for family arrangements.

However:

• HMRC is increasingly scrutinising these arrangements
• It is generally safer to gift existing shares, rather than issuing new ones

This reduces the risk of the shares being treated as employment-related.

A word of caution: Keep control where it matters

While sharing ownership can be beneficial, there are risks.

Business owners should:

• Keep shares within trusted individuals
• Avoid issuing shares purely for emotional reasons
• Consider shareholder agreements to protect control

Poorly structured ownership can lead to:

• Disputes
• Loss of control
• Difficult future decisions

Final thoughts

Your company’s share structure is one of the most powerful tools for:

• Tax planning
• Profit extraction
• Succession planning

With changes to dividend tax and IHT rules from 2026, reviewing your structure is more important than ever.

Need help reviewing your company structure?

At Merranti Accounting, we help business owners:

• Restructure shareholdings tax-efficiently
• Plan for succession
• Minimise CGT and IHT exposure

If you’re considering transferring shares or reviewing your current setup, get in touch with our team today.