Navigating Succession in Family Firms: Adapting to Reforms in Business Property Relief
By Allan Discua‑Cruz and Martin Kemp
Succession in family firms has always been a delicate balancing act. It is not just about passing on ownership; it is about continuity of vision, preservation of legacy, and the well-being of employees, customers, and communities.
In the UK, Business Property Relief (BPR) has historically provided vital support for this transition by reducing the inheritance tax (IHT) burden on qualifying business assets (Kemp, 2024). However, reforms announced in the October 2024 Budget, which come into effect from April 2026, represent a significant tightening of the regime (HM Treasury, 2024; House of Commons Library, 2025). These changes may require some family businesses to rethink their succession strategies.
This article explores the implications of these reforms, drawing on research evidence and professional practice, and offers guidance for business families and their advisers as they navigate this new terrain.
Succession as a Relay Race: and the New Hurdles
Succession in family firms can be likened to a relay race: the baton must be passed securely to ensure continuity between generations. Internal hurdles include strained family relationships, unclear roles, or unprepared successors. External hurdles involve market pressures, taxation, and regulation.
Tax has historically been a decisive factor. Before BPR was introduced in 1976, high estate duties often forced families to sell businesses simply to meet the tax bill (Fletcher, 2021). Some converted to public companies or sold stakes, sacrificing family control in the process. These experiences underline why BPR was created – to stop viable family firms being broken up at succession purely to pay tax (House of Commons Library, 2025; UK Parliament, 1990).
In 2022/23, HMRC data shows that BPR sheltered about £3.34 billion of assets from IHT. Of the estates that claimed BPR, just 2% (those claiming more than £5 million) accounted for around 45% of the total relief awarded. By contrast, 56% of the claiming estates had relief claims under £250,000 each (HMRC, 2025).
The reforms to BPR announced by the UK Government in October 2024 add a new set of hurdles. From April 2026:
A £1m per person allowance for APR+BPR at 100%; value above the allowance relieved at 50%.
Relief for unlisted shares, previously at 100%, is reduced to 50%.
AIM-listed shares (treated as ‘not listed’) will qualify for 50% BPR (not 100%) and will not use the £1m 100% allowance.
Sources: HM Treasury, 2024; House of Commons Library, 2025.
The Office for Budget Responsibility (OBR) estimates that around 2,000 estates annually will face higher IHT bills as a result (OBR, 2024). Family Business UK has warned that the reforms could dampen investment and succession plans, with knock-on effects for jobs and growth (CBI Economics for FBUK, 2025). Conversely, independent analysts argue that the relief was overly generous and concentrated among a small number of high-value estates (IFS, 2024; Resolution Foundation, 2024).
The challenge for business families is to adapt to this more constrained environment without undermining their long-term continuity.
Key Challenges for Family Firms
Increased Tax Liabilities – Larger estates, particularly those holding substantial unlisted shares, may face materially higher IHT bills under the new allowance and 50% relief (For broader expected business impacts, see CBI Economics’ modelling for FBUK).
Liquidity Pressures – Meeting higher IHT bills could require asset sales, restructuring, or borrowing, placing strain on cash flow and investment capacity.
Strategic Uncertainty – The reforms may lead to anticipatory behaviours, such as accelerated succession, changes in ownership structures, or reconsideration of whether to retain family control. Stakeholder survey evidence (IoD 2024; FBUK/CBI, 2025) indicates that some firms anticipate reducing investment/restructuring.
Behavioural Responses – There is some evidence that family successions can depress firm performance (see OECD, 2021). The BPR reforms may accelerate generational transitions, with potential implications for firm performance and resilience.
Lessons from Research and Practice
Research into family business succession highlights several enduring lessons:
Formalize succession planning: Families that establish clear rules early, communicate transparently, and engage all stakeholders tend to navigate succession more successfully (Dyck et al., 2002). Practice guidance from the IFB and FBRF stresses the importance of written succession plans, structured governance processes, and involving family councils or boards to ensure smooth transitions (IFB Research Foundation, 2019; Singh et al., 2024).
Invest in successor development: Preparing successors through education, external experience, and gradual integration into the business strengthens continuity and legitimacy (Howorth & Discua Cruz, 2024). Research highlights that mentoring, tailored training, and meaningful engagement opportunities are important for developing motivated and credible successors (Howorth et al., 2016; Singh et al., 2024).
Combine continuity with renewal: The willingness of current leaders to let go and assume new mentoring or strategic roles is critical. Succession is not just about preserving legacy – it is also a chance to refresh leadership and strategy for future growth (Le Breton-Miller et al., 2004). Phased transitions, role redefinition for incumbents, and openness to next-generation perspectives help preserve legacy while fostering renewal (IFB Research Foundation, 2019; Howorth et al., 2016; Singh et al., 2024).
Adapt strategies to changing tax rules: Use of trusts, holding companies, and other legal structures has long been part of succession planning. With reforms to BPR, proactive tax and financial planning will become even more important. [1]
Conclusion: Adapting to Change
The 2024 reforms to BPR signal a new era for family business succession in the UK. While smaller estates remain largely unaffected, larger and more complex family firms face new challenges. The baton can still be passed successfully to the next generation, but it will require foresight, preparation, and adaptation. Family businesses that invest in strong governance, successor development, and proactive financial planning will be best placed to thrive in this changed environment.
The Family Business Research Foundation is undertaking new research to track how family firms adapt to these reforms, combining case studies, stakeholder interviews, policy analysis and a review of evidence. This work will provide vital insights for policymakers, advisers, and business families. In the meantime, advisers and family business leaders should act now to prepare their plans, ensuring that succession remains a source of renewal rather than risk.
About the Authors
Dr. Allan Discua Cruz, Director of the Centre for Family Business at Lancaster University Management School and Chair of the Research Committee at the Family Business Research Foundation
Dr Martin Kemp, Head of Research, Family Business Research Foundation
Notes
[1] For more detail on business relief, trusts and hold-over relief, see HMRC Inheritance Tax Manual (IHTM25000 et seq.)
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