If your plan for passing the business on to your kids, a co-founder, or anyone else involves them simply inheriting it, changes that took effect this April are worth understanding properly — because the tax bill that comes with that handover just got bigger for a lot of family businesses, and a campaign to reverse it is now aimed squarely at the 28 October Budget.
What changed in April
Business Property Relief (BPR) and Agricultural Property Relief are the inheritance tax reliefs that have traditionally let trading business assets pass to the next generation free of inheritance tax, on the reasoning that forcing heirs to sell a working business to pay a tax bill helps nobody. From April 2026, that relief is capped: the first £2.5 million of qualifying assets per estate still gets 100% relief, but anything above that threshold now only gets 50% relief instead of the previous 100%. For a business worth meaningfully more than £2.5 million — not a huge figure once you count premises, stock, equipment and goodwill together — that’s a real inheritance tax bill where there wasn’t one before.
The numbers behind the campaign
Family Business UK, representing family-owned firms, is pushing Chancellor John Healey to reverse the change in the Autumn Budget, arguing it puts 208,500 jobs and £14.86bn of economic output at risk. Their case rests on a specific mechanic: family businesses are usually asset-rich and cash-poor, so an inheritance tax bill on the business itself often can’t be paid from savings — it has to be paid by selling assets, borrowing against the business, or in some cases selling the business itself, sometimes to an overseas buyer. Given family businesses make up over 90% of UK firms and employ 57% of the workforce, mostly outside London and the South East, this isn’t a niche concern.
Why this matters even if you’re not selling or dying soon
It’s easy to file inheritance tax planning under “problem for later,” but the practical issue is that the tax charge crystallises on death, not on some date you get to choose — so the planning has to happen well in advance, often years before it’s needed. Whether or not the Budget reverses this change, the £2.5 million threshold is now the number every business owner with succession plans needs to know their own valuation against, because it determines whether this is a live issue for your business or not.
Limited company and sole trader perspectives
Limited company: A three-generation family joinery business, valued around £4 million once premises and equipment are counted, is now looking at a real inheritance tax exposure on the £1.5 million above the threshold — prompting the second generation to start formal succession planning years earlier than they’d originally intended.
Sole trader: A sole trader running a single skip-hire business with a modest asset base is comfortably under the £2.5 million threshold and largely unaffected directly — but if they’re planning to grow through acquisition, it’s worth knowing the threshold now rather than discovering it once the business has grown past it.
Quick checklist
- Get a realistic valuation of your business (including premises, stock and goodwill) — £2.5 million is easier to reach than it sounds once everything’s counted.
- If you’re above the threshold, talk to an accountant or solicitor about succession planning now, not when it becomes urgent.
- Watch the 28 October Budget for whether this campaign gets any traction — but don’t delay planning on the assumption it will be reversed.
- Family Business UK’s case is that this issue affects most UK firms indirectly, even ones well under the threshold, through the wider economic impact — worth knowing the context even if your own business isn’t exposed.
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