Family-business owners often put off succession planning because it feels awkward, emotional or distant. Yet the Autumn Budget 2025 has made delay riskier for family-run firms. With key thresholds frozen and some reliefs tightened, more estates and business sales are likely to fall within inheritance tax and capital gains tax over the next few years.
At the start of 2025 there were around 5.7m private sector businesses in the UK, almost all of them small and medium-sized enterprises (SMEs)(Office for National Statistics (ONS), 2025). A large share are family-run and together they support millions of jobs and a significant slice of private-sector turnover. When succession goes wrong, the impact is felt not just by one family but by staff, customers and suppliers who rely on the business.
In this article, we share succession planning tips for family-run firms based on the 2025/26 rules after the Autumn Budget 2025. We focus on practical steps that help you keep control, manage tax exposure and reduce the risk of disputes, while still keeping family relationships at the centre.
Why succession planning matters for family-run firms
Succession is not only about tax. For most family owners, the bigger questions are who should be in charge, who should own what and how to keep things fair. That is exactly why it pays to start early and revisit the plan regularly, rather than waiting for a health scare or a family disagreement.
A clear plan helps you with the following.
- Protect family wealth: Keep more of the value within the family rather than losing it to tax or disputes.
- Support the next generation: Give successors time to learn the ropes, build credibility and earn trust.
- Reduce conflict: Set expectations about ownership, roles and decision-making before problems arise.
- Reassure stakeholders: Show lenders, suppliers and staff that the business will keep running smoothly when you step back.
The Office for Budget Responsibility (OBR) expects the overall tax burden to remain high through the rest of the decade (OBR, 2025). That makes planning ahead – rather than reacting when someone falls ill or passes away – even more important for family-run firms.
Practical succession planning tips for family-run firms
When we work with owners on succession planning tips for family-run businesses, we usually start with the family, not the tax rules. Here are some helpful early conversations.
- Personal objectives: When you would like to slow down, what income you need and what retirement looks like for you.
- Family roles: Who genuinely wants to work in the business, who is better suited to being an owner only and who might prefer to be bought out.
- Fairness versus equality: How you will balance “fair” outcomes with equal shares, particularly where some children are active in the business and others are not.
Once the family goals are clearer, we normally put the commercial plan first and the tax plan second. In other words, design a structure that keeps the business viable and then use the tax rules to support it. That approach tends to produce more robust succession planning tips for family-run firms than starting with a tax saving and forcing everything else to fit.
Getting the ownership structure and valuation right
A sensible ownership structure makes everything else easier. If you have a mix of family shareholders and working directors, it is worth considering the following.
- Shareholder agreements: Set out how shares can be transferred, how key decisions are taken and what happens if someone wants to leave.
- Different share classes: Separate control from economic ownership, for example, where parents want to retain voting control for a period while passing value to the next generation.
Gradual transfers can also help, for example, moving shares over several years and being mindful of the seven-year inheritance tax rule on gifts. Structured properly, this can spread risk, use allowances efficiently and give successors time to grow into their roles.
A realistic, well-supported valuation is essential. It underpins share transfers, management buy-outs and any sale to external buyers or an employee ownership trust (EOT). An independent valuation can reassure all family members that the figures are fair and provide evidence if HMRC later raises queries.
Balancing inheritance tax and capital gains tax
Under the 2025/26 rules, the main inheritance tax nil-rate band remains at £325,000 per person, with a further £175,000 residence nil-rate band for passing on a qualifying home to direct descendants. These thresholds are frozen until at least 2030/31, so rising asset values will bring more estates into scope over time (HMRC, 2025).
If you hold shares in a trading company, business property relief (BPR) can reduce the value of qualifying shares for inheritance tax, often by up to 100%. From April 2026, however, the Autumn Budget 2025 caps the amount that can benefit from 100% relief at £1m across business and agricultural property, with any excess potentially taxable (HM Treasury, 2025). That timetable matters if you plan significant share transfers in the next few years.
On the capital gains tax side, business asset disposal relief (BADR) gives a 14% rate on qualifying business disposals in 2025/26, with a £1m lifetime gains limit (Society of Professional Accountants, 2025). For disposals after 2025/26 the rate is due to increase, so owners thinking about a sale to a third party or management team may wish to factor that into their timing when applying succession planning tips for family-run firms.
Disposals to EOTs – a popular route for some family-run firms who want to reward staff and keep the business independent – have also changed. From 26 November 2025, Budget 2025 reduces the capital gains tax relief on qualifying disposals to EOTs from 100% to 50%. This route can still work well, but the numbers now need closer analysis to weigh EOTs against other options such as a family buy-out or external sale.
Alongside the business, your will, any trusts and insurance policies must work together with the plan. Up-to-date wills, clear letters of wishes and carefully structured trusts or family investment companies can help ring-fence assets for younger generations. Sensible life assurance can provide cash to pay inheritance tax or buy out a shareholder’s estate without forcing a rushed sale of business assets. Taken together, these tools help support the succession planning tips for family-run firms set out above.
Putting your succession plan into practice
A good succession plan is more than a document. It is a process that usually unfolds over several years. In practice, we suggest the following.
- Regular reviews: Revisit your plan every two to three years, or sooner after a major life event or tax change.
- Involving advisers early: Bring together your accountant, solicitor and financial planner so the corporate, tax and personal angles line up.
- Clear communication: Explain the plan to family members and key managers so expectations are realistic and there are fewer surprises later on.
If you have not yet started, or your plan is very informal, our business advisory team can help you put together a practical first draft and then refine it over time. You can read more about how we support SME owners at our business advisory team and you are always welcome to contact us for bespoke advice.
Protecting your family-run firm with a clear succession plan
Succession planning can feel uncomfortable, especially when family dynamics and money are involved. Yet for many SME owners the business is the single biggest asset on the personal balance sheet. Putting some time into succession planning tips for family-run firms now is often the difference between a smooth handover and years of tension, unexpected tax bills and business disruption.
The 2025/26 rules – frozen inheritance tax thresholds, tighter reliefs and higher capital gains tax rates on the horizon – mean that delays can be expensive. A joined-up plan covering ownership, management roles, wills, trusts and protection policies can help you retain flexibility while still giving the next generation a clear path.
If you would like tailored succession planning tips for family-run businesses, we are here to help. We can review your structure, model different scenarios and work with your legal and financial advisers to put a realistic plan in place. To get started, please contact us to discuss succession planning tips for family-run firms with one of our specialist advisers.