Family business owners across the UK are raising concerns that new inheritance tax rules could undermine long-term growth, push firms toward sales, and divert investment from expansion, as fresh limits on business relief come into effect.
From April 6, reforms to business property relief, now called business relief, introduced a £2.5 million cap on the value of assets that can be passed on free from inheritance tax. Any value above the cap faces an effective 20 percent tax rate. Married couples can combine allowances up to £5 million, but the changes mark a major shift from previous rules that allowed qualifying business assets to be transferred entirely tax-free.
The short lead time for the reforms has left many family-owned firms scrambling to adjust succession plans developed over decades. Advisers report a surge in demand for tax planning services as owners explore restructuring, partial sales, or bringing forward succession decisions.
Matthew Ayres, managing director of Bennie Group, a fourth-generation construction and equipment supply business, described the timeframe as “far too short” and said firms were focusing on tax planning instead of growth. “Family businesses are spending their time inwardly doing tax planning instead of growing their businesses,” he said, calling the reforms “madness.”
Research from Family Business UK highlights the scale of potential impact. Among 559 business owners surveyed, 57 percent said they expect to be materially affected by the changes, while just one in ten believed they would avoid any effect. The organisation estimates there are 5.1 million family firms in the UK, employing 15.8 million people and generating £2.8 trillion in turnover, making the sector a cornerstone of the economy.
More than a quarter of firms surveyed said they might not remain family-owned within the next decade, with inheritance tax changes cited as a key factor. Leaders warn the rules could accelerate sales of family firms as owners seek to avoid future tax liabilities or reduce the complexity of succession. Ayres noted that his company has already seen increased acquisition opportunities as other business owners opt to sell rather than pass their companies to the next generation.
The reforms arrive amid rising operational costs, including higher national living wages, energy bills, and business rates. Geopolitical tensions, particularly in the Middle East, are contributing to economic uncertainty and pushing up energy costs. Business leaders describe the combination of factors as a “perfect storm,” limiting the ability of firms to invest, hire, and grow.
Family Business UK has called for a full review or potential reversal of the reforms, warning that they could weaken a vital part of the UK economy. Chief executive Neil Davy said family firms “are rooted in Britain’s towns and cities in a way global corporations can never be,” and cautioned that current policies may favour external investors over domestic businesses.
The organisation is also advocating for broader reforms, including changes to business rates, improved access to export finance, and incentives for employee ownership and community investment. As the new rules take effect, family businesses face a more complex and costly inheritance landscape, while policymakers must weigh the intended tax benefits against potential consequences for the UK’s economic foundations.
