Budget risks undermining “legacy, growth and stability” of family-owned businesses, says expert

The Chancellor's Autumn Budget unveiled plans to cap inheritance tax relief at £1 million, which has evoked concern among small business owners, many of whom rely on passing control of their companies down through the family.

Professor Ajay Bhalla, Professor of Family Business and Innovation at Bayes Business School says the move could jeopardise the long-term health of existing family-run organisations, as well as stifling a major contributor to the UK economy and growth.

“The budget’s introduction of a 20% Inheritance Tax (IHT) on assets over a £1 million threshold for family business successors could have serious consequences," he said.

“Embedded deeply in the UK society, family businesses are the backbone of the UK economy, accounting for more than 85% of all UK firms. Together, they contribute more than 40% of the nation’s Gross Domestic Product, create over half of all private sector jobs, and channel more than £225 billion into the UK’s public finances each year.

“It is well-known that these businesses are essential to the UK’s economic future. Yet, instead of encouraging their continued success, the Chancellor’s recent Budget risks destabilising them and, in the process, making an irreparable damage to the very fabric of UK society.

“There is no doubt among family business owners that this will make it much harder for the next generation to take up the mantle of keeping the company running, will certainly discourage reinvestment and threaten the long-term health of these vital firms."

Alongside the new inheritance tax rates, Agricultural Property Relief (APR) and Business Property Relief (BPR) have also been amended.

“The new cap on Business Property Relief (BPR) and Agricultural Property Relief (APR) at £1 million further dampens the ambitions of family business owners, by making succession planning increasingly difficult," Professor Bhalla continued.

“For the first time in a generation, family business owners now face the prospect that their legacy, growth, and stability may be at risk due to policies that hinder succession and stifle the UK’s longstanding engine of enterprise.”

ENDS