In the Autumn Budget on 30 October 2024, Chancellor Rachel Reeves announced proposed changes to the Inheritance Tax (IHT) regime that are likely to affect many family businesses – such as family-owned independent retail jewellers – as they pass the business to the next generation.
Many CMJ retailer members and suppliers are independent businesses that have been in the same family for generations. Under the current tax regime, if a person dies and leaves the business to their spouse or children, Business Relief means there is no tax liability. However, under the proposed changes, this sort of succession planning will incur a 20% IHT charge on assets over £1m.
When Business Relief was introduced in 1976, the purpose of it was to make sure that family-owned business could survive as a trading entity after the death of the owner.
What are the new inheritance tax rules?
The new rules introduce a cap on Business Relief so that some IHT will be payable for any business with more than £1m of assets. The first £1m is free from IHT; after that, IHT will be incurred at a rate of 20%.
For example, if your family business is worth £10m and you die after 6 April 2026, £1m of the business will be passed down without any IHT. The remaining £9m could be taxed at 20% – meaning £1.8m would have to be paid within six months of the death.
When do the new inheritance tax rules come into force?
The new rules are due to come into force from 6 April 2026.
As pressure mounts to consult on these proposed changes, there is still the possibility that these proposals may not go ahead.
Independent retail organisation Bira is actively collaborating with Family Business United UK (FBUK) to address business’ critical concerns around IHT. The Prime Minister announced in Parliament that his team is ready to review individual cases; this opportunity invites all businesses to write directly to the Prime Minister, copying in their local MP, to outline the impact of these policies on their businesses and demand a formal review and Consultation.
Bira is encouraging independent retailers to use a letter template for this, making it easier to share personal stories and advocate for change. The shared goal is to ensure that policymakers fully understand the challenges posed by the current cap and the urgent need for reform.
Andrew Goodacre, CEO of Bira, said: “Independent retail is made up of many long-standing family businesses, proudly serving their communities for many years.
“There can be no greater satisfaction than, after many years hard work, to pass the business on to younger family members. The changes to inheritance tax make this very much harder, if not impossible in some cases. It is hard to understand why the government is doing this, especially as there is so little reward, if any, for them.
“We will continue to work with our partners to campaign for this change to be reversed. This is no way to revitalise high streets – ironically one of the main focus areas for this government.”