Budget 2025 delivered a mixed picture for family businesses. While some of the most worrying proposals that had been trailed in recent weeks did not appear, this remains a Budget that raises significant revenue, leaving the UK with the highest overall tax take since the second world war.
The Chancellor spoke of wanting the UK to be “the best place to start up, scale up and stay” and said that “growth begins with the spark of an entrepreneur”. She promised that “if you build here, Britain will back you”.
These are welcome words but the measures announced today don’t fully match that ambition for family businesses.
Snapshot
- No major shocks: Many feared tax hikes did not materialise.
- Still a revenue-raising Budget: Freezing personal tax allowances and thresholds means more income will be drawn into higher tax bands over time. Dividend and property tax changes will also increase the overall burden.
- Inheritance Tax relief: A small concession – the new £1 million cap on 100% Business and Agricultural Property Relief can now be shared between spouses, allowing up to £2 million in total. But the cap remains, and relief above that level is still restricted.
Want to know how the Budget will affect you? Join our Budget Webinar – where we’ll unpack the key measures, explain what they mean for your business, and answer your questions live.
Join the Budget webinar
Notable announcements
Inheritance Tax
- The government has announced that unused allowance for agricultural and business property reliefs will be transferable between spouses and civil partners.
- This brings BPR/APR allowances in line with normal IHT allowances that everyone gets.
- For some, their effective allowance will now be £2 million not £1 million.
- Indexation: the government has delayed the indexing of the £1 million allowance to the Consumer Price Index (CPI) to 2031, one-year later than stated in the Finance Bill. Indexation of the reliefs has been an important ask we have put to government so, further delay is disappointing and will have the effect of pulling more and more businesses above the threshold at which full relief from IHT is removed.
Despite speculation in the press, there have been no changes to IHT gifting rules or CGT uplift on death.
However, in the detail of the Budget (in what’s known as The Red Book) there is commentary about anti-avoidance measures around IHT:
The government will legislate to prevent Inheritance Tax avoidance through certain loopholes, including ensuring UK agricultural property held via non-UK entities is treated as UK-situated addressing Budget 2025 changes in status of trust assets before and exit charge, and restricting charity exemptions to direct gifts to UK charities and clubs.
We will be following up with HM Treasury and HMRC to get more details on the specifics around these announcements.
Commenting on the changes announced to the rules on spousal transfers, FBUK CEO Neil Davy said
The Chancellor’s announcement allowing family business owners to transfer their £1m allowance between spouses is a welcome step and one of the proposals we asked the Government to consider.
But it represents a minor tweak to a policy that is doing enormous damage to private and family owned businesses and farms.
The changes to BPR and APR have led business owners to cut investment and stop hiring. Regardless of today’s concession, family businesses and farms are subject to a tax that no other model of business ownership has to pay.
The announcement is recognition that the Government got this policy wrong last year. Minor tweaks do not make it right. The right thing for government is to pause this policy and work with us to find a better solution than this damaging tax.
UK economic context at a glance
- The government forecasts UK GDP growth of 1.5% in 2025, up from 1.0% at the time of the previous spring forecast.
- The independent forecaster Office for Budget Responsibility (OBR) has lowered its medium-term productivity outlook by 0.3% to 1.0% by the end of the five-year period.
- The OBR has downgraded its forecast for business investment, with growth in investment averaging 0.75% a year between 2026-2030
- The government is on track to meet its fiscal rules: borrowing is forecast to fall, and public-sector debt (as a share of GDP) is set to decline by 2029–30.
- The government will ‘more than double’ the fiscal headroom against its stability rule to £21.7bn.