Norma Stewart

From April 2026, the planned cap to Business Property Relief (BPR) and Agricultural Property Relief (APR) for Inheritance Tax (IHT) potentially upends decades of careful estate planning.

A considerable number of family business owners are looking at these changes and wondering if they should accelerate plans to sell the business or transfer ownership to the next generation. Estate planning and succession planning are terms which are used interchangeably. However, whilst tax rules change, the wisdom of careful and timely succession planning is about much more than tax planning. Owners and shareholders should try and think of succession planning as a collaborative framework for both family and business continuity.

The family business sector, which employs 14 million people in the UK, sees around 85,000 family SMEs transfer ownership of their business to the next generation every year. However, only 30% have an up to date will and around 70% do not have a succession plan.

Entrepreneurial family businesses are some of the UK’s most successful, contributing a quarter of British GDP. Astonishingly, Scottish family businesses generate annual turnover of £145bn. They are significant revenue generators but also significant employers, income generators and wealth creators. They make a huge difference to the communities in which they operate. Unfortunately, less than one in three make it to the second generation and just 15% survive to the third.

Allowing recent new taxes including concerns around tougher NIC rules to dictate and bring forward a change in ownership could be a decision made in haste and regretted at leisure. The best transitions happen when seniors and the next generation act in partnership to build the methodical approach needed to overcome all the forces that favour doing nothing. Succession takes place gradually with the passing of ownership, authority and control to the rising generation in small steps.

Succession planning is often built up as the main challenge facing family firms but it is more of a personal matter with individuals recognising the right time to step down, hand over the reins and focus on their personal objectives whilst the next generation need the affirmation and belief in their own ability to step up and take the business forwards.

In the normal course of life there is an inevitability that the time will come for one generation to step down and the next to step up to the plate. Easily said but not so easy to put into practice, unless everyone buys into the process. Rather than becoming a significant issue and something that cannot be discussed, families that succeed in business for generations recognise the need to be open, frank and deal with the matter at hand. In other words, this pivotal moment for any family, and consequently the business, can be an opportunity for both generations.

For the older generation change provides an opportunity to consider your personal journey, how you want to spend your ‘golden years’ and the role, if any, you want to have in the business going forward.

Most owners want to keep the business going within their family, especially where the organisation is the key contributor to the family’s wealth. That means ceding control at some stage. It’s a hard concept to grasp but the whole process is reliant on recognising this and putting the necessary preparation in place to be comfortable walking away from the business in an orderly fashion.

Similarly, the next generation have an opportunity to embark on the next stage in their journey, within or outside the business, and if outside, may retain a vested interest by way of share ownership. In either scenario, the next generation have the opportunity to continue the family traditions and move the business forward, whether by developing new skills to become the leader of the family firm, or to further enhance their knowledge to become responsible business owners.

Like any job, family members should only be considered for taking over based on their individual merits. You may have more than one family member as an option. That’s a good problem.

From an early stage find ways to involve children in the business and discussions about it. Gradually present it as a career option. Assume an informing role so that the business isn’t seen as a family obligation. Present the business in a balanced manner detailing the privileges, responsibilities and commitment required. The more involved they become, the more trust you’ll feel in them to take over. Should they choose another career option, that’s far from the end, support it.

Many children pursue alternative careers only to return to the family fold later. It can be very beneficial as success in another area can build esteem and credibility. They will then enter the business with their own views and competencies which could give you confidence in their ability to take on the role and develop the business.

If you’re successor agrees to join then you should develop a career plan to develop their skill set around the business, where needs are identified. As mentors, non-family directors and trusted senior managers can play important roles in the succession process.

Establish a clearly defined role and set objectives with timelines to achieve them. That will then form the basis for performance assessment, helping to set a remuneration package in line with other non-family members of the firm.

Monitor progress and as objectives are met so your anxiety will ease about letting go. Create a plan to transfer assets and control to your successor in a gradual manner that doesn’t hurt staff morale, ensures the smooth day-to-day running of the business while also protecting other family members’ interests and allaying concerns.

Succession is not simply a question of handing over a tried and tested way of running the business from one generation to the next. It is a system change – a transition to a different business structure with a distinctive culture, new procedures and evolving ground rules.

We would encourage any owners worried about the tax changes to avoid reacting, to take advice and develop a strategy that works for them, their families and their communities.

Norma Stewart is a partner with Azets and expert in family business structure, succession and taxation