In 2026, the business environment for SMEs and entrepreneurs is becoming more complex and competitive than ever before. Economic uncertainty, evolving tax policies, and the relentless challenge of attracting and retaining top talent are reshaping priorities. Nick Gabay and Elliot Lewis of Thackray Williams outline three strategies that should be on the radar of leaders seeking to future-proof their businesses and personal wealth.
1. Growth Share Schemes: A Modern Approach to Incentivising Talent
For many years, Enterprise Management Incentive (EMI) schemes were the preferred method for rewarding key employees. They allowed businesses to grant share options with favourable tax treatment, aligning employee interests with company performance. However, with the tightening of eligibility criteria and lifetime compliance burdens, many SMEs have begun searching for alternatives. Growth Share Schemes – sometimes called hurdle share schemes – are now emerging as a powerful solution.
Unlike EMI options, which give employees the right to buy shares later, growth shares confer immediate ownership, but with a condition: they only carry value once the company exceeds a predetermined hurdle. For example, if a business is valued at £5 million today, growth shares might only participate in proceeds above that figure (£5 million being the ‘hurdle’). This structure ensures that rewards are tied directly to future success, motivating employees to drive growth beyond the current baseline.
The appeal of growth shares lies in their ability to create genuine alignment between employees and shareholders. When individuals feel they have a real stake in the business, their mindset shifts from short-term remuneration to long-term value creation. This is particularly important in sectors where talent is scarce and competition fierce. Businesses that embrace this model often report improved retention and engagement, as employees see a clear link between their efforts and their financial reward.
Implementing such schemes, however, is not without complexity. Valuation must be robust, tax implications carefully managed, and documentation watertight. Missteps can lead to disputes or unexpected liabilities. Professional advice is essential – not just at inception but throughout the life of the scheme. Growth shares can be highly effective, but they demand precision and clarity to deliver their intended benefits.
2. Management Buyouts: Succession Without Sacrificing Culture
Succession planning has always been a sensitive subject for owner-managed businesses. For many, the thought of selling to a trade buyer or private equity firm raises fears of cultural dilution and staff upheaval. We have seen Management Buyouts (MBOs) emerging as a preferred alternative for business owners looking to preserve continuity, loyalty and a smoother transition.
An MBO involves selling the business to its existing management team rather than an external party. This approach appeals to owners who prioritise legacy over maximum sale price. It allows them to protect the ethos and values they have built, while rewarding the people who have contributed to the company’s success. For many, this is not just a financial transaction – it is a way of safeguarding the future of the business and the livelihoods of its employees.
The benefits are clear. Management teams already understand the business, reducing due diligence risks and integration challenges. Deals can often be structured flexibly, with payment spread over time and funded from future profits. However, this very flexibility introduces complexity. Owners may retain some control until fully paid, and financing arrangements often involve a mix of bank loans and deferred consideration.
Yet, MBOs are not a quick fix. They demand early planning – identifying the right team, valuing the business, assessing financial viability, and mapping out governance post-completion. Legal and tax considerations abound, from warranties to funding structures. Engaging advisers at the outset is critical to avoid pitfalls and ensure the deal delivers for all parties. For owners who value continuity and culture, an MBO can be the ideal solution – but it needs to be executed with care and foresight.
3. Family Investment Companies: Securing Wealth for the Next Generation
Beyond the boardroom, another challenge looms large: intergenerational wealth transfer. Recent tax changes have made this more compelling for business owners: the freezing of Inheritance Tax thresholds is pulling more estates into the tax net; the increases in Capital Gains Tax on assets and Business Assets Disposal Relief announced in the 2024 Budget; and the changes to IHT business reliefs from 100% to 50% for the value over £1 million from this April.
Unsurprisingly, more entrepreneurs are considering alternative options to improve tax efficiency. Family Investment Companies (FICs), which also offer greater control and enable you to transfer far more than under a lifetime interest trust, are emerging as a compelling solution.
At their core, FICs allow individuals to move significant assets out of their estate while retaining control over how those assets are managed and distributed. The mechanism is elegant: create a company with different share classes – one conferring voting rights without economic benefit, others granting entitlement to income and capital but no control. Parents typically hold the former, children the latter. This structure enables wealth to pass down without relinquishing decision-making power.
The tax advantages are notable. Profits within the FIC are subject to corporation tax rather than higher personal rates, and growth accrues outside the founder’s estate for inheritance tax purposes. Loan notes can add further flexibility, allowing founders to extract funds tax-free over time.
However, FICs are not for everyone. They involve setup costs, ongoing compliance, and require familiarity with corporate structures. Typically, they suit those with £500,000 or more to invest. Professional advice is indispensable – not just on incorporation but on share design, loan arrangements, and long-term planning. For those who meet the criteria, FICs can be a cornerstone of effective estate planning, ensuring wealth is preserved and managed responsibly across generations.
Why These Strategies Matter
What unites these three trends – growth shares, MBOs and FICs – is a common theme: control and alignment. Whether it is aligning employee incentives with business performance, ensuring succession without sacrificing culture, or transferring wealth while retaining oversight, these tools empower owners to shape outcomes proactively rather than reactively.
2026 will reward those who plan ahead. These are not just technical mechanisms – they are strategic levers that can define your business’s trajectory and your family’s financial legacy.
The coming year promises both challenges and opportunities. For business owners willing to engage early with these strategies, the rewards can be transformative – driving growth, securing succession, and safeguarding wealth for generations. The key is to act now. In a world where uncertainty is the only certainty, foresight is your greatest asset.
Meet the Experts
Both partners at leading Southeast law firm Thackray Williams, Nick Gabay heads the Corporate and Commercial Sector while Elliot Lewis is the Head of the Private Client Department.
Thackray Williams is a leading full-service law firm with offices in Bromley, the City of London, Sevenoaks, and West Wickham.