Family businesses are the backbone of the UK economy, built over generations with long-term vision and careful ownership. However, recent changes to Inheritance Tax (IHT) are creating new challenges for business owners that are wanting to plan for their future.
Following reforms introduced in the 2024 Budget, many family-run businesses are now facing increased uncertainty around succession planning - and may need to act sooner than expected.
What has changed?
Historically, reliefs such as Business Property Relief (BPR) have helped reduce or eliminate the IHT burden when passing a business to the next generation. These reliefs have been a key part of enabling family businesses to remain intact across generations.
However, recent reforms have reduced the scope of these reliefs in certain circumstances. While the full impact will depend on individual structures, the overall direction is clear: transferring a business is becoming more complex and potentially more costly from a tax perspective.
Why is this a concern?
The changes are already influencing decision-making across the business sector.
Research suggests that more than half of UK family businesses could be affected*, with many owners now reconsidering their long-term plans. There is growing concern that businesses may feel pressured to transfer ownership earlier than intended, in order to mitigate potential tax exposure.
But this could have wider implications. As many finance and business advisers have noted, Accelerating succession before a business - or its leadership team - is fully prepared, may impact stability, growth and long-term success.
The risks of rushed succession planning
Succession planning is rarely just about tax. It requires careful consideration of a range of legal, financial and personal factors.
For many business owners, this includes identifying the right successor or leadership structure and ensuring that the business is both financially and operationally ready for transition. There may also be complex family dynamics to manage, alongside the need to protect the long-term value and reputation of the business.
When decisions are made too quickly, there is a greater risk of uncertainty, internal conflict or disruption to operations. In some cases, this can affect not only the business itself but also relationships within the family.
Taking a proactive approach
While the changes to IHT present challenges, they also highlight the importance of early and proactive planning.
Business owners should take the opportunity to review their existing succession plans and consider how the new rules may affect their position. This may involve reassessing current ownership structures, exploring alternative arrangements or identifying ways to mitigate tax exposure while maintaining stability within the business.
And because every family business is different, it is important that any approach is tailored to the specific circumstances involved. Taking advice early can help ensure that both the business and the family behind it are protected for the future.
How Coles Miller can help
We understand that family businesses are about more than just assets - they represent livelihoods, relationships and long-term ambitions.
Our experienced teams can support you in navigating these changes with confidence.
Private Client team
Our Private Client team can provide comprehensive advice on wills and estate planning, ensuring that your business interests are properly accounted for alongside your personal assets. A carefully structured will is essential to ensure your wishes are carried out and to minimise the risk of disputes or unintended tax consequences.
We can also advise on the use of trusts to protect business assets, helping to safeguard value for future generations while allowing for flexibility in how those assets are managed and distributed. Trust structures can be particularly useful in balancing the needs of different family members or protecting the business from external risks.
In addition, we offer tailored guidance on inheritance tax planning strategies, identifying practical ways to mitigate potential tax exposure while remaining compliant with current legislation. This may involve reviewing existing arrangements and recommending adjustments in light of the recent reforms.
Finally, we can support you in structuring the transfer of wealth across generations, ensuring that succession is handled in a way that aligns with both your personal wishes and the long-term interests of the business.
Corporate and Commercial team
Our Corporate and Commercial team works closely with business owners to support effective business succession planning, helping to ensure that leadership transitions are well-managed and that the business is prepared for the future.
We can advise on shareholder agreements and governance structures, putting in place clear frameworks that define roles, responsibilities and decision-making processes. This is particularly important in family businesses, where clarity can help avoid misunderstandings and protect relationships.
Where ownership changes are required, we assist with ownership transitions and restructuring, ensuring that any transfer of shares or interests is carried out efficiently and in a way that supports the ongoing success of the business.
Above all, our focus is on protecting the continuity and stability of the business. By taking a strategic and forward-thinking approach, we help ensure that the business remains resilient, well-governed and positioned for long-term growth.
Planning for the future
The recent IHT changes serve as a reminder that succession planning is not something to leave until later. Taking advice early can help ensure that your plans remain aligned with both your personal wishes and the evolving legal landscape.
With the right guidance, it is possible to manage tax exposure while safeguarding the future of your business.
If you would like to discuss how these changes may affect you, our experienced teams will be happy to help.
Need Help with Inheritance Tax planning?
For expert legal advice, contact Coles Miller Partner Anthony Weber, Head of the Wills and Probate Department. He has three decades of legal experience, specialising in wills, probate, living wills, administration of estates, powers of attorney and dealing with the Court of Protection and the Office of the Public Guardian.
Tony is a member of the Law Society’s Private Client Section (formerly the Probate Section).
He is based at Coles Miller’s Fleetsbridge office.
*taken from the BBC article: https://www.bbc.co.uk/news/articles/cx2yxr00r29o
