Inheritance tax (IHT) has long been a concern for family businesses, but changes to the taxation of business and agricultural assets on death have prompted many to re-examine their succession plans and consider whether existing arrangements remain fit for purpose.
The restriction of 100% Agricultural Property Relief and Business Property Relief restricted to a combined £2.5m allowance per individual means many established businesses – particularly those with valuable land, property or trading assets – may find parts of their estate fall outside full relief for the first time.
Family businesses need to consider how the changes impact them, the risks they bring and what steps can be taken now to protect continuity and lasting value.
Why this matters for succession planning
The key concern is not simply the tax itself, but how it is paid. If a large bill arises and the business is asset-rich but cash-poor, successors could be forced to sell assets, take on debt, or even sell the business itself to fund the tax bill.
This is particularly relevant for multi-generational businesses, aiming to retain family ownership, and for farming businesses where much of the value is tied up in land rather than income-producing assets.
Even for profitable businesses, a sudden tax liability can place strain on working capital at a critical moment.
Explore options early
Succession planning is rarely straightforward but greater flexibility – and more tax-efficient outcomes – is available when planning begins early.
Options may include lifetime gifting, restructuring ownership between family members, or reviewing the use of trusts.
It’s equally important to confirm that the business still qualifies for relief under the new rules, as changes in activity or structure can have unintended consequences.
Balance tax, control and fairness
Succession planning goes beyond tax efficiency and must also balance control, fairness among family members, and long-term sustainability.
IHT reforms have accelerated these discussions for many families.
Key questions include who should inherit the business, how non-involved family members should be treated, and how decision-making power should transfer.
The importance of regular reviews
Many family businesses have succession plans that were put in place under very different tax and commercial conditions.
The new IHT rules highlight the need to regularly review plans to ensure they reflect current law, business value and family circumstances.
Even where no immediate changes are made, having up-to-date valuations, clear documentation and an agreed plan will prove invaluable if circumstances change suddenly.
Taking the next step
While the IHT reform has created understandable concern, it also presents an opportunity to strengthen succession plans.
Early, informed planning can reduce uncertainty, protect the business, and provide greater confidence for the future.
