Many families in the UK who own small businesses or farms could soon face big tax bills. This is because of new changes announced by Chancellor Rachel Reeves. Starting April 2026, families may have to pay up to £500,000 in inheritance taxes when they pass on their businesses to children or relatives.
These new rules are causing stress and frustration for many hardworking families across the country.
What Is Inheritance Tax?
Inheritance Tax (IHT) is a tax paid on a person’s estate (property, money, and possessions) when they die. Usually, there are some special rules that help small business and farm owners avoid paying too much tax. These are called Business Property Relief (BPR) and Agricultural Property Relief (APR). But now, the rules are changing—and not for the better.
What’s Changing with Inheritance Tax?
Rachel Reeves announced in her latest budget that starting in April 2026, there will be major changes to BPR and APR:
- Relief will only apply up to £1 million
- Any value above £1 million will be taxed at 20%
So, if your business or farm is worth more than £1 million, your family could be taxed on the rest. Before this change, many small businesses and farms were fully protected from inheritance tax. Now, they could face large tax bills just to keep the family business running.
How Much Could Families Have to Pay?
Tax experts at Saffery, a leading advisory firm, say that the average tax bill under the new rules could be around £547,000. This is a huge cost for any family, especially when passing down a small business or a family farm. Even a small corner shop in places like the South East, where property values are high, might go over the limit and face five-figure taxes.
Zena Hanks from Saffery says this is especially unfair. Many of these families have worked for generations, created jobs, and supported the local economy. Now they feel like they are being punished just for owning something valuable.
Who Will Be Affected?
The new inheritance tax rules will likely impact:
- Family-owned shops
- Small and medium farms
- Local family-run businesses
- Businesses with high property values
Even if a business doesn’t make a lot of money each year, the value of the building or land could push it over the £1 million limit.
How Much Will the Government Make?
The Office for Budget Responsibility expects the new rules to bring in an extra £500 million per year by 2027-28. In addition, 2,000 more estates every year will now have to pay inheritance tax, according to HM Revenue & Customs (HMRC).
Why Are People Upset?
Many business owners and farmers feel that this change is unfair. They say the government didn’t consult with them before making this decision. Some Members of Parliament (MPs) have asked for the changes to be delayed until April 2027. They argue that more time is needed to fully understand how this will hurt small businesses.
MP Alistair Carmichael, who chairs the committee on environment and rural affairs, said the decision ignores farmers’ voices. Recently, many farmers protested by driving their tractors to Westminster to demand fair treatment.
What Happens Next?
These tax changes are causing serious concern across the country. Families who hoped to pass their businesses to their children now face losing part of their legacy. While the government says the extra money will help support public services, many feel it comes at too high a cost for hardworking families.
Conclusion
The upcoming inheritance tax changes could deeply impact small businesses and farms across the UK. Families who have worked hard for generations may now face taxes of over £500,000, making it harder to keep these businesses in the family. As the debate continues, many are hoping the government will delay or rethink the plan.
With more than 2,000 extra families expected to pay this tax, the pressure is rising for action before April 2026 arrives.
FAQ’s
1. What is Business Property Relief (BPR) and Agricultural Property Relief (APR)?
These are tax breaks that reduce or remove inheritance tax on farms and family businesses when passed down to someone else after death.
2. When do the new inheritance tax changes start?
The new rules will begin in April 2026. After that, relief will only cover up to £1 million. Any amount above that will be taxed at 20%.
3. Who will these changes affect the most?
Families who own small businesses, shops, or farms—especially those with high property values—will be the most affected by the new tax rules.