Majority of family businesses still affected by new rules on inheritance tax despite changes to the policy
Investment and jobs continue to be cut in response to the new tax
Only 74% of firms confident they will remain family-owned in 10 years
The majority (57%) of family businesses say they will still be affected by changes to inheritance tax according to a new survey commissioned by Family Business UK. The findings, which come one month before the policy change takes effect, show that just one in ten family business owners believe they will not be affected at all by the changes to inheritance tax.
The study, which polled 559 owners and senior decision makers in family businesses located across the UK, in all sectors of the economy, shows that changes to Business Property Relief (BPR) and Agricultural Property Relief (APR) will still have a material impact on Britain’s family-owned businesses.
More than half of family businesses (55%) taking part in the survey, with 10-49 employees, say they will continue to be affected by inheritance tax. That proportion increases to almost two-thirds (64%) for businesses with 100-249 employees. Businesses in manufacturing (64%); the IT and telecoms sector (54%); and the retail, catering and leisure sector (52%) will be most affected.
Amendments to BPR and APR were announced just before Christmas increasing the level at which family businesses must start paying inheritance tax from £1 million to £2.5 million. Married couples will also be able to transfer unused allowances effectively allowing them a total of £5 million. Two fifths of family businesses taking part in the latest FBUK survey (42%) describe these amendments as positive but almost one in three (31%) say it will have no impact on them.
FBUK is calling on government to act urgently on the following:
- pause the introduction of the policy to allow for a full, independent review of the policy, and publish a full impact assessment leading to,
- full reversal of the policy – reinstating 100% Business Property and Agricultural Property Relief, with no upper thresholds, to support the family business sector and unlock investment in jobs, skills and economic growth.
Neil Davy, CEO FBUK said:
“Next month, for the first time in a generation, family business owners will have to pay inheritance tax based on the value of their business and business assets. Since the change was first announced in October 2024, we have seen significant numbers of family businesses cut investment and jobs. Many owners have also told me that they are openly questioning the long-term future of their business. For a government committed to growing the economy this can’t be the outcome it envisaged.
“At a time when the UK desperately needs the economy to grow, this is the wrong policy at the wrong time. We are ready to work constructively with government to achieve a positive outcome that prevents further investment and jobs being lost.”
Matthew Ayres, 4th generation Managing Director of Bennie Group said:
“The new inheritance tax rules force family businesses like ours to gamble on the future. Instead of focusing our energy on innovation, growth and serving our customers, we are being pushed into a defensive position. A position where we spend time and resources on complex tax planning that many other types of businesses never have to consider. It is an unnecessary distraction that pulls leadership attention away from investing, hiring and building for tomorrow.
“Family businesses succeed when we look outward; at markets, opportunities, and long‑term value creation. This policy turns us inward, encouraging risk‑averse behaviour and short‑term protectionism. It is completely out of line with the UK’s need for a clear economic growth strategy. If government wants businesses to invest with confidence, it cannot keep introducing policies that create uncertainty, drive up costs, increase risk, and divert efforts away from productivity and innovation.”
According to the latest research from FBUK, more than 70% of family businesses taking part in the survey have already taken steps to mitigate the impact of changes to inheritance tax. Of those taking steps:
- 27% said they have paused or cancelled investment,
- 23% have reduced headcount or paused recruitment,
- 20% have intentionally held back the growth of the business,
- 21% have cut or reduced charitable donations.
(respondents were asked to select all options that apply)
The majority of family businesses (77%) say they also plan to take further steps over the next three years. Of those planning to take further action:
- 26% plan to take out insurance to cover the cost of inheritance tax,
- 23% will further reduce headcount or pause recruitment,
- 20% plan to reduce investment,
- 10% said they plan to close the business and liquidate assets, and a further 10% plan to sell their business entirely.
According to the study just 74% of family businesses surveyed say they are confident they will remain family owned in ten years’ time, down from 91% in the next three years. Owners cite various reasons for their drop in confidence but highlight increasing costs and regulation, a weak economic outlook and, given the changes to inheritance tax, difficulty in finding family members willing to take on the business.
Lizzy Rudd, Chair of Berry Bros. & Rudd, Britain’s oldest fine wine and spirits merchant said;
“As a 327-year-old family business, we have always strived to be stewards for future generations. As a B Corp we also place great value on employing people, considering the wider community and the environment in all that we do. How are we expected to continue to build value for the long term when our children will one day have to pay inheritance tax on this value – a value which is on paper and not in our pockets unless business assets or the business itself is sold?
“Changes to inheritance tax are a very real threat to the future success of the business. In addition to the higher costs of operating right now, these changes are an additional burden for family businesses at the very time the Government should be encouraging us to invest. This tax will drive behaviour that I don’t believe the Government really want, neither does it really understand the principles on which we operate.”
James Reed, Chairman and Chief executive of recruitment giant Reed, one of Britain’s biggest family businesses, said:
“Family businesses are the backbone of our economy and generally excellent employers, so there is a good reason that for decades it has been possible to pass them safely from generation to generation.
“The changes to the way they are taxed coming into effect in April put all that at risk. Great British companies will be broken up and sold off to foreign owners and private equity.
“Ultimately, this isn’t good business because we know that once job losses and reduced economic activity are taken into account, this change will actually mean the exchequer collecting less money overall.
“My concern is that this will end up being a lose-lose for everyone, which is why Labour Chancellor Denis Healey introduced business property relief in the first place.”
Research was conducted for FBUK by Censuswide, among a sample of 559 owners and senior decision makers in family businesses. The data was collected between 16th January 2026 and 2nd February 2026. Censuswide is a member of the Market Research Society (MRS) and the British Polling Council (BPC), and a signatory of the Global Data Quality Pledge. Censuswide adheres to the MRS Code of Conduct and ESOMAR principles.
