Building Britain for Generations: A Policy Agenda for Family Businesses
Ownership Taxes Following the Government’s changes to Inheritance Tax affecting Business Property Relief (BPR) and Agricultural Property Relief (APR), family businesses feel that tax instability is undermining their ability to grow. FBUK’s Taxing Futures report shows that the behavioural impact could result in up to 208,000 full-time jobs being lost between 2026 and 2030. 5 The report showed that in the four months after the changes were announced at the Autumn Budget of 2024, 60% of family businesses expected to reduce investment by more than 20%, and 23% had already reduced headcount in anticipation of the reforms. 6
The removal of full Business Property Relief (BPR) and Agricultural Property Relief (APR) is the main area of succession relief that is impacting growth and gives a competitive advantage to PLCs and foreign-owned competitors who do not pay a 20% Inheritance Tax liability. When factoring in the Dividend Tax, this results in an effective tax rate of 33% on the value. FBUK data shows that 57% of family businesses will still be affected by the changes to BPR, even with the increase in the threshold to £2.5million announced in December 2025. 7 Furthermore, almost a quarter (23%) of family firms said that full reversal of the changes to BPR and APR would encourage them to take on staff over the next three years. Almost a half (48%) of family-run businesses with more than 500 employees said that full reversal would encourage them to take on staff. 8
Recommendations: Reintroduce full Business Property Relief and Agricultural Property Relief to support continuity in family ownership. Reinstatement of full 100% Business Property relief, with no upper thresholds, could provide a tax surplus to the Treasury by unlocking capital investment and creating, and sustaining, more jobs. In the short term, Government should commission a full independent review of the policy, assessing the behavioural impacts on family businesses. This would enable Government to understand the impact and reconsider the policy.
Three key issues: 1. Double taxation: if shareholders must extract cash to pay Inheritance Tax, that extraction is typically taxed again (e.g., Dividend Tax), meaning a second layer of tax purely to pay the first. 2. Financing costs: where families borrow personally to meet the liability, they face real and ongoing interest expenses. 3. Liquidity vs. investment: even with instalments, the business must still preserve cash and de-risk, which directly competes with capital investment, innovation investment and hiring.
5 & 6 CBI Economics report commissioned by FBUK: Taxing Futures The economic and fiscal implications of changes to BPR & APR for UK family businesses and farms June 2025 7 Inheritance tax reliefs threshold to rise to £2.5m for farmers and businesses – GOV.UK 8 Censuswide Survey commissioned for Family Business UK, Jan-Feb 2026.
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