Family Business Succession Planning

Date: September 23, 2025

Passing a family business to the next generation is about much more than handing over the keys. For family business owners in the UK, it involves navigating complex tax rules, accounting requirements, and legal obligations while preserving both the company’s value and family harmony. Without early preparation and professional advice for family business succession planning, families risk facing unnecessary inheritance tax (IHT), capital gains tax (CGT), or even disputes that could destabilise the business.

Why Family Business Succession Planning Matters

Family businesses are the backbone of the UK economy, yet statistics show that many do not survive beyond the first generational handover. Succession planning helps owners prepare for the future by addressing both financial and interpersonal challenges.

Business owners often ask themselves:

How can I transfer my business to my children while keeping tax bills under control?
What inheritance tax reliefs are available for passing on a business?
How do I structure ownership in a way that protects both the company and the family’s legacy?

By putting plans in place early, you can reduce tax exposure, avoid conflicts, and secure the stability of your business for future generations.

This is even critical with the scheduled changes to Business Property Relief and Agricultural Relief. These will take effect from April 2026 and are set to disproportionately affect Family Businesses. Anyone with holdings in business or agricultural assets, including unlisted or AIM shares, could face increased inheritance tax liabilities under the new rules.

At Alexander & Co, we are urging family business owners to review their estate plans now, even if these have been reviewed in the last year. This will help them to take advantage of current reliefs and avoid potential pitfalls before the changes apply.

Key Tax Considerations for Family Business Transfers

Inheritance Tax (IHT): Inheritance tax can place a significant financial burden on business transfers, with a standard rate of 40% on estates above the nil-rate threshold. Reliefs such as Business Property Relief (BPR) can help reduce the liability for qualifying assets. Thoughtful use of trusts or phased transfers may also preserve family control while easing the tax impact.

Capital Gains Tax (CGT): When transferring or selling shares in a family business, capital gains tax may apply. Obtaining an accurate valuation and choosing the right timing is essential. Reliefs such as Business Asset Disposal Relief can reduce the tax bill, while share transfer strategies can balance tax efficiency with long-term succession goals.

Stamp Duty Land Tax (SDLT): If the business owns property, a transfer of ownership could trigger SDLT. Careful structuring of property holdings and professional guidance are key to avoiding unexpected costs.

Trusts and Succession Planning: Trusts can be a useful tool for protecting family wealth and controlling how business assets are passed on. However, they come with reporting obligations and possible IHT consequences, so they should always be used with expert advice.

Accounting Considerations in Family Business Succession Planning

Business Valuation: A clear, independent valuation forms the foundation of effective succession planning. It ensures fairness among heirs and provides the basis for accurate tax calculations. Up-to-date financial statements, cash flow forecasts, and asset registers are essential.

Regulatory Compliance: Maintaining accurate and compliant accounts reduces the risk of hidden tax liabilities and provides transparency during the transfer process. Regular financial reviews or audits can offer reassurance for both the outgoing and incoming owners.

Cash Flow Planning for Tax Bills: Succession often brings with it hefty tax obligations. Planning how to fund inheritance tax, CGT, or SDLT liabilities is crucial. Businesses may need to plan for liquidity through retained earnings, external financing, or other arrangements to avoid pressure on day-to-day operations.

Practical Steps for UK Family Businesses

Plan Early: The earlier succession planning begins, the more options are available for tax savings and smooth handovers.
Seek Expert Advice: Accountants, tax specialists, and solicitors can provide tailored guidance for your specific family and business circumstances. At Alexander & Co, we can provide expert advice from a tax and accountancy point of view. We also work closely with Several solicitors who are specialists in assisting family businesses.
Consider Phased Transfers: Handing over responsibility and ownership gradually often reduces tax exposure and helps the next generation step into leadership roles.
Formalise the Plan: A written succession plan avoids misunderstandings and ensures clarity for all family members and stakeholders.

Family business succession is not just a financial transaction; it is about protecting the legacy you’ve built. By addressing key tax issues such as IHT, CGT, and SDLT alongside accounting best practices, business owners can safeguard their company for the next generation.

Alexander & Co – Family Business Specialists in Succession Planning

At Alexander & Co, our specialist tax advisers and accountants work with family businesses across the UK, providing specialist tax and accountancy advice to assist with succession planning. With the right guidance, you can preserve more of your wealth, meet HMRC requirements, and secure your family’s legacy for years to come.

Given the proposed changes to Business Property Relief and Agricultural Relief, currently going through parliament, it is more crucial than ever to consider succession planning advice as soon as possible.

Contact us now to discuss how we can assist your family business. Please use the contact form on this page. Alternatively, you can also email or telephone us:

Telephone: 0161 832 4841 or 0207 167 7220

Email: info@alexander.co.uk