EXECUTIVE SUMMARY
Inheritance tax (IHT) is a tax charged on the estate of someone who has died. For the owners of, and shareholders in family businesses, whose personal wealth is retained and invested in the company, important reliefs from IHT exist to ensure business continuity when ownership of the business and assets are passed upon death. Business Property Relief (BPR) and Agricultural Property Relief (APR) are long-standing policies which have offered 100% relief from IHT on qualifying business and agricultural assets. They support the model of family business by giving owners confidence to develop long-term strategies that promote investment, create employment and support structured succession planning in multi-generational businesses. The Government’s Autumn Budget in 2024 introduced changes to how BPR and APR will be applied to family- owned enterprises. From April 2026, 100% relief from IHT on qualifying assets will be limited to the first £1 million of claims. Above this threshold IHT will be applied to assets at a reduced rate of 50% (effectively a 20% rate of inheritance tax). These changes will have a material impact on family-owned businesses and farms. This report, commissioned by Family Business UK (FBUK), supported by a consortium of other trade associations and conducted independently by CBI Economics, aims to quantify the effects of this policy change. It builds on previous work in late 2024 and early 2025, providing more detailed analysis and additional information on the impact of these changes on local areas and specific sectors. The analysis shows that, given the unique shareholding structure and continued investment in the business’s capital assets, the policy change will lead to widespread behavioural change among family business owners who could be forced to reduce investment, withdraw capital, dispose of assets or shareholdings, or sell or shut the business entirely to release cash to fund an IHT liability. These actions will weaken the competitiveness of the businesses themselves and the wider UK economy by reducing employment opportunities for working people and disrupting long-term sources of wealth creation in local communities.
Key findings from CBI Economics analysis, backed by a comprehensive survey of more than 4,100 family-owned businesses and farms, suggest that between October 2024 and April 2030 the policy change could result in:
• A significant reduction in investment: 55% of BPR-affected and 49% of APR-affected businesses have paused or cancelled planned investments, resulting in an average decrease in investment of 16%.
• Reduction in turnover: the anticipated changes are expected to lead to an average reduction in turnover of 9% amongst family businesses and farms.
• Fewer jobs: just under half of family businesses and farms foresee a reduction in headcount or have paused recruitment, with an average reduction per firm of 9%.
• Community impacts: 15% (BPR) and 12% (APR) of businesses have cut charitable donations or community activities, which will impact vital local initiatives.
• Financial pressures: two-thirds (68%) of affected businesses have already sought legal advice, with many expecting to continue doing so going forward.
5
Made with FlippingBook - professional solution for displaying marketing and sales documents online