The Autumn Budget introduced significant changes to the Inheritance Tax (IHT) system, specifically affecting how Business Property Relief (BPR) and Agricultural Property Relief (APR) apply to family-owned businesses. These reforms are expected to have a major impact on family businesses and farms across the UK, particularly those with multi-generational ownership.
With 5 million family firms in the UK employing more than 15 million people and contributing over £200 billion annually in taxes, the sector plays a crucial role in the national economy. Since 1976, the current IHT relief system has enabled family business owners to plan for the future with confidence, ensuring that their enterprises could transition smoothly to the next generation without significant tax burdens.
However, the Autumn Budget changes could threaten the sustainability of many of these businesses.
To assess the impact, Family Business United conducted a nationwide survey of family businesses in January 2025, revealing significant concerns across the sector.
BUSINESS CONFIDENCE HAS DECLINED
How do you feel about the future financial profitability of your family firm following the Autumn Budget?
More confident | 0% |
About the same | 13% |
Less confident | 87% |
GROWTH AMBITIONS HAVE BEEN IMPACTED
Has the Autumn Budget affected your family firm's growth plans?
Yes | 80% |
No | 17% |
Don't Know | 3% |
BUSINESS PROPERTY RELIEF CHANGES ARE A MAJOR CONCERN
Will the changes to Business Property Relief affect your business?
Yes | 82% |
No | 9% |
Don't Know | 9% |
RISING IHT LIABILITIES COULD FORCE BUSINESS SALES
What do you estimate the IHT liability on shares passed to the next generation to be?
Less than £1 million | 16% |
Between £1 and £5 million | 37% |
Between £5 and £10 million | 17% |
Over £10 million | 11% |
Don't Know | 19% |
Will your business need to sell part or all of its assets to meet this liability?
Yes | 52% |
No | 15% |
Don't Know | 33% |
NATIONAL INSURANCE CHANGES ADD FURTHER FINANCIAL STRAIN
Wil the changes to National Insurance Contributions impact your family business?
Yes | 94% |
No | 3% |
Don't Know | 3% |
What is the estimated additional annual cost to your business due to the increased National Insurance Contribution rates?
Less than £10,000 | 12% |
Between £10,000 and £50,000 | 27% |
Between £50,000 and £100,000 | 12% |
Between £100,000 and £250,000 | 21% |
Between £250,000 and £500,000 | 14% |
Over £500,000 | 7% |
Don't Know | 3% |
Not Applicable | 4% |
HOW ARE FAMILY BUSINESSES RESPONDING?
The results of the survey identified that family businesses are already making difficult strategic decisions in response to the financial pressures that they are facing.
The top actions taken as a result of the changes introduced in the Autumn Budget:
Reviewed/revised short-term business strategy - 58%
Conducted/conducting full succession planning review - 53%
Frozen new recruitment - 48%
Frozen/reduced pay rises/bonuses - 47%
Cancelled planned capital expenditure - 42%
Considered selling the family business - 30%
Cancelled already approved capital expenditure - 29%
Reviewed headcount and implemented or plan to implement redundancies - 26%
A CALL TO ACTION
Paul Andrews, Founder and CEO of Family Business United underscores the gravity of the situation: "The family business sector has spoken, and the results are deeply concerning. The shift in emphasis from long-term planning to short-term survival is detrimental to the UK's growth ambitions."
"Family businesses are the backbone of our economy, providing jobs, innovation, and stability. They need policies that enable them to invest in their future, support their employees, and continue contributing to their communities."
"The changes to the inheritance regime fail to recognise that family businesses are often asset-rich but cash-poor."
"The death of a shareholder does not generate liquid cash, yet these changes may force businesses to divert funds from growth initiatives - or even sell the business altogether - to meet IHT obligations."
"As a community, we must continue to raise our voices, engage with policy makers, and ensure that decision-makers understand the full impact of these changes. Family businesses matter, and the consequences of these decisions will affect not just our sector but the entire UK economy."
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