Inheritance Tax Raid Could Cost Jobs, Growth – and Family Businesses in 2025
There’s been a lot of noise in the press this week about potential changes to Business Property Relief (BPR) and Agricultural Property Relief (APR) — the two key mechanisms that currently protect family businesses from large Inheritance Tax (IHT) liabilities when passing the business on to the next generation.
And for good reason.
According to analysis by CBI Economics (commissioned by Family Business UK), these proposed changes could result in:
- 208,500 full-time jobs lost by April 2030
- £14.8 billion drop in Gross Value Added (GVA) to the UK economy
- A net fiscal cost of £1.9 billion to the Exchequer (yes, cost, not benefit)
- And almost half of affected family businesses saying they’d reduce headcount or cancel investment plans
In short: this is one of those policies that looks good on paper for raising tax revenue, but quickly unravels under scrutiny.
What’s actually being proposed in terms of changes to Inheritance Tax and BPR?
While full details haven’t been published, the concern is that BPR and APR — which currently allow qualifying business and agricultural assets to be passed on free from Inheritance Tax — will be severely limited from its current levels.
These reliefs aren’t loopholes. They exist to protect continuity in businesses where the wealth is tied up in working capital, land, property, and machinery — not sitting idle in a bank account.
Without them, family members inheriting a trading business could be forced to sell it (or parts of it) just to pay the tax bill. Or indeed take the cash out of the business, paying income tax in the process and essentially diverting funds which may otherwise have been used to reinvest in creating jobs, wealth and growth.
While our current understanding (unconfirmed) is that there will be an opportunity to pay the inheritance tax interest free over 10 years, this only spreads the pain rather than removing it.
But surely it’s fair that everyone pays their share?
Of course — but let’s not confuse a policy aimed at the very wealthy with the reality for most family-run enterprises.
At IN Accountancy, we act for hundreds of small and medium-sized family businesses across the North West. Many of them:
- Employ local people
- Reinvest profits to grow
- Own commercial property (often their largest asset)
- Don’t have excess cash lying around to cover a 40% tax charge on the value of their business
The message this kind of policy sends is: Don’t bother building something long-term. Don’t invest in people, or property, or plant. Just draw what you can while you can.
It’s short-term thinking — and deeply counterproductive for anyone who believes in sustainable economic growth.
So what should business owners do?
If you’re a business owner thinking about retirement or succession in the next 5–10 years, we would strongly recommend you start planning now, so that once we have the legislative details you will be in a stronger position to take action and mitigate your liabilities.
Regardless of whether the changes happen or not, a proactive succession and tax planning strategy is essential. That might include:
- Reviewing your shareholding structure
- Considering a trust or family investment company
- Looking at lifetime gifting or phased transition
- Reassessing your Will and power of attorney arrangements
- Taking a view on when is the right time to pass on assets, and how
Every situation is different, and there’s no one-size-fits-all answer. But burying your head in the sand and hoping for the best isn’t a strategy.
Final thought
Whatever your view on tax reform, we should be very wary of policies that punish those who create value, employ people, and take long-term risks.
If the goal is to grow the UK economy sustainably, we should be supporting family businesses — not putting barriers in their way.
IN Accountancy Tax Director, Paul Brown commented
“These policy changes have all the hallmarks of poorly thought out policy which has the potential to be almost entirely counter-productive. There are alternatives which may be used to mitigate the impacts, but it is hugely frustrating that we are now 8 months on from the time the changes were announced in the Budget and we have still not seen the legislation to implement the new rules. The risk is we only have a short time to act once the final rules are announced so having a plan now, even without implementing it, should enable business owners to respond quickly when we finally do see the detail.”
If you’d like a second opinion on your plans, or just want to talk through what this could mean for you or your family, we’re here to help.
