Wills for the Self-Employed UK (2026): Protecting Your Business, Family and Estate

A sole trader and their business are legally the same entity — there is no separate legal personality. On the sole trader's death, the business ceases to exist: (1) THE BUSINESS CEASES: unlike a limited company (which survives the death of its owner), a sole trader's business has no legal existence beyond the person. The business name, contracts, and trading relationships do not automatically transfer to anyone else; (2) EMPLOYMENT CONTRACTS END: under the Law Reform (Frustrated Contracts) Act 1943 and common law, employment contracts of any employees are terminated automatically on the employer's death — unless the executor continues the business within the executor's year (AEA 1925 s.39 permits this for up to one year without beneficiary consent). Employees may have unfair dismissal and redundancy claims unless the executor steps in quickly; (3) CLIENT CONTRACTS: depending on the contract terms, client contracts may frustrate (terminate) automatically on the sole trader's death. Professional services contracts in particular are often personal — clients contracted with the specific individual. The executor should review all outstanding contracts and notify clients promptly; (4) BANK ACCOUNTS FROZEN: the sole trader's business bank account is, in law, their personal account. Banks freeze all sole-name accounts on notification of death. Without a registered Property and Financial Affairs LPA, this happens on incapacity as well as death — leaving employees unpaid, suppliers unmet, and HMRC obligations unaddressed; (5) ASSETS IN THE ESTATE: the business assets (stock, equipment, vehicles, goodwill, receivables, intellectual property) fall into the estate. The executor must: (a) collect outstanding debts; (b) continue the business temporarily if appropriate (to preserve goodwill for sale); (c) sell business assets at open-market value; (d) finalise and submit any outstanding self-assessment returns; (e) pay any outstanding VAT, PAYE/NIC, and income tax; (6) WILLSAFE UK WILL — BUSINESS CLAUSE: a will for a sole trader should specifically name the executor as having authority to carry on the business for up to one year (or longer if the court grants it), to protect goodwill value and ensure a better sale.

Yes — a sole trader's business may qualify for 100% Business Property Relief (BPR) under IHTA 1984 ss.103-114, potentially eliminating IHT on the business value entirely: (1) 100% BPR ON SOLE TRADER BUSINESS (IHTA 1984 S.105(1)(A)): the business of a sole trader — including goodwill, business premises (held as business assets), stock, and other trading assets — can qualify for 100% BPR. The result is that the IHT charge on the business value is reduced to nil. The remaining estate (personal assets, investment properties, savings) is charged to IHT in the normal way; (2) QUALIFYING CONDITIONS: (a) The business must be wholly or mainly trading (not investment). A freelancer, consultant, trades person, or professional practice typically qualifies — they are providing services for profit. A business that mainly holds investments or rental properties does not qualify; (b) The sole trader must have owned the business for at least 2 years immediately before death. A business started in the last 2 years does not qualify; (3) EXCEPTED ASSETS (IHTA 1984 S.112): assets held within the business but not used for business purposes (excess retained cash above operational needs; personal investments; non-business vehicles; unused land) are excluded from BPR. HMRC will strip out excepted assets when assessing the BPR-eligible value; (4) APRIL 2026 BPR CAP (FINANCE ACT 2024): from 6 April 2026, combined BPR and Agricultural Property Relief (APR) at the full rate is capped at £1 million per person. Business value above £1 million in qualifying BPR/APR assets is taxed at 20% (half the standard 40% IHT rate). For sole traders with a business worth more than £1 million, the IHT liability above the cap needs to be planned for — typically through a whole-of-life policy in trust funded from surplus income; (5) HOW BPR INTERACTS WITH THE WILL: the most tax-efficient approach is to leave qualifying business assets to non-exempt beneficiaries (typically children, not the surviving spouse). The spouse exemption makes BPR redundant if the assets pass to a spouse (the exemption applies regardless and the BPR is wasted). Leaving the business to children on first death uses both the BPR and the NRB; the spouse inherits non-business assets using the spouse exemption.

A self-employed person's will has several requirements that are irrelevant for a regular employee: (1) AUTHORITY FOR THE EXECUTOR TO CONTINUE THE BUSINESS: under AEA 1925 s.39, an executor has power to carry on the deceased's business for up to one year — but only if the will expressly authorises this. Without this clause, beneficiaries might demand immediate realisation of business assets, destroying goodwill. Include: 'I give my executor full power to carry on and manage my business for such period as my executor thinks fit in the interests of my estate'; (2) DIRECTION ON BUSINESS SUCCESSION: who should receive the business — a business partner, a family member who works in the business, or instruction to sell on the open market? For a professional practice (accountant, solicitor, architect), the professional regulator may require registration changes before the practice can continue — the executor needs time; (3) SPECIFIC BEQUESTS OF BUSINESS ASSETS: tools, vehicles, equipment, and intellectual property may be of value to specific beneficiaries. A will can make specific gifts of named business assets to avoid these being included in the residuary estate or sold without consideration of their specific value to a beneficiary; (4) PARTNERSHIP INTERESTS: if you are a partner in a partnership, the partnership agreement may contain a death clause preventing automatic dissolution under Partnership Act 1890 s.33. If there is no such clause, the partnership dissolves on your death — and your share of the partnership assets falls into your estate. Check whether the partnership agreement addresses death; if not, raise this with your partner(s) while you are still alive; (5) HMRC AND TAX OBLIGATIONS: self-assessment tax returns for the year of death must be filed and outstanding tax paid before the estate is distributed. This takes time. The will should appoint an executor with the practical ability to deal with HMRC — either a professional executor (accountant or solicitor) or a family member with financial aptitude. The executor should be made aware of outstanding HMRC obligations as part of the handover; (6) PROFESSIONAL INDEMNITY AND ONGOING CLAIMS: for professional sole traders, professional indemnity insurance may have a claims-made basis. The executor must maintain the 'run-off' cover for claims arising from work done before death. Include authority for the executor to maintain professional insurance.

For an employed person, losing capacity may result in sick pay and HR procedures. For a self-employed person, it means the immediate collapse of their business — with no one having authority to act. An LPA is therefore more urgent for the self-employed than for anyone else: (1) BANK ACCOUNTS FROZEN ON INCAPACITY: sole trader bank accounts are personal accounts. When a bank is notified that the account holder has lost mental capacity, it freezes the account. Without a registered Property and Financial Affairs LPA, no one — not a spouse, not a business partner — can operate the account. Employees cannot be paid. Suppliers cannot be paid. HMRC obligations cannot be met; (2) HMRC DOES NOT PAUSE: HMRC continues to expect self-assessment returns, VAT returns, and PAYE/NIC submissions even during the account holder's incapacity. A registered LPA attorney can submit these on the donor's behalf and respond to HMRC correspondence; (3) CLIENT RELATIONSHIPS REQUIRE CONTINUITY: a registered LPA attorney for a self-employed person can: (a) communicate with clients to maintain ongoing work; (b) issue invoices for work already completed; (c) collect outstanding receivables; (d) manage the wind-down or continuity of the business with the least disruption. Without an LPA, none of these acts are authorised; (4) COURT OF PROTECTION IS TOO SLOW: the alternative to an LPA — a Court of Protection deputyship — takes 6–12 months to obtain. A self-employed business cannot survive a 6-month gap in authorised management. By the time a deputyship is granted, the business may be worthless; (5) MAKING THE LPA: the Property and Financial Affairs LPA (LP1F) should be registered while the self-employed person is working and healthy — not as an emergency when they are already facing illness. It costs £82, takes 8–20 weeks, and can be made online at gov.uk/power-of-attorney.

HMRC obligations do not end on death — they become obligations of the estate, enforced against the executor: (1) FINAL SELF-ASSESSMENT RETURN: a tax return must be filed for the tax year of death, covering income from 6 April to the date of death. The executor must: (a) register with HMRC as executor using form SA1 (if not already in self-assessment); (b) file the return by 31 January following the end of the tax year of death; (c) pay any outstanding income tax and class 4 NIC. HMRC will charge interest and penalties for late filing or payment; (2) VAT REGISTRATION: if the deceased was VAT-registered, the executor must notify HMRC of the death promptly. The executor can continue trading and keep the VAT registration during the administration period. Deregister when the business is wound up or sold. File all outstanding VAT returns. The executor is jointly and severally liable for VAT debts if they distribute assets before settling VAT liabilities; (3) PAYE/NIC FOR EMPLOYEES: if the business had employees, the executor must notify HMRC via the payroll software that the employer has died; continue RTI submissions for any period of continued employment; submit a final FPS/EPS. Final wage payments and holiday pay may be owed; (4) CLASS 2 NIC: Class 2 NIC contributions for the year of death are payable via self-assessment. Class 4 NIC applies to profits in the final accounting period; (5) HMRC COMPLIANCE CHECK PERIOD: HMRC has up to one year from the filing date to open a compliance check into the final return (or up to 4 years for careless error; 20 years for deliberate fraud). The executor should retain business and tax records for at least 6 years after the date of death; (6) CAPITAL GAINS TAX: if business assets are sold during administration at more than their probate value, any gain is subject to CGT in the estate at 18%/20% (depending on asset type). The estate's annual exempt amount is £3,000 (2026/27). CGT must be reported within 60 days for UK residential property; (7) PROFESSIONAL EXECUTOR FOR SELF-EMPLOYED ESTATES: for a complex self-employed estate with ongoing business, outstanding HMRC obligations, employees, and clients, appointing a professional executor (accountant with estate administration experience) may be worth the fee.