UK bosses rush to hand firms to children within next 5 years to beat Labour’s tax raid

Nearly one in five business owners are planning to transfer their companies to their children within the next five years as a direct response to Labour’s forthcoming inheritance tax reforms, new research reveals.

A survey conducted by accountancy firm Moore UK found that 19 per cent of entrepreneurs intend to pass on their enterprises before death to minimise their tax liabilities.

The findings come ahead of significant changes to Business Property Relief set to take effect from April, when family firms and agricultural businesses will face inheritance tax charges for the first time.

The research surveyed 520 directors of UK companies with annual turnover between £1 million and £30 million.

Mark Lance, chief executive of Moore UK, has cautioned that accelerating these handovers could prove counterproductive when recipients are unprepared for leadership responsibilities.

“There is a serious risk that business owners are being forced into these transfers by the changes to IHT to the potential detriment on those businesses,” he said.

“Having these very experienced business owners suddenly step away from the management of these businesses has clear disadvantages.”

Mr Lance added that successors may assume control before acquiring sufficient expertise. “Consequently, they may lack the life experience, expertise and know-how to manage these organisations effectively,” he warned.

The Government confirmed on December 23 that inheritance tax would apply to business assets exceeding a £2.5million threshold.

From April 6, 2026, both Business Property Relief and Agricultural Property Relief will be capped at this level, with only 50 per cent relief available on values above it.

Moore UK’s data revealed notable variations in transfer intentions based on company size. Entrepreneurs running businesses with revenues between £5million and £10million showed the strongest inclination to act, with 23 per cent planning to hand over ownership.

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By contrast, just 13 per cent of those with turnover of £2.5million to £5million expressed similar intentions.

Perhaps most strikingly, the survey found that 45 per cent of business owners would contemplate relocating abroad because of the UK’s tax regime.

Income tax savings motivated the largest proportion, with 18 per cent citing this as their primary reason for potential departure.

A further 12 per cent said they would move to find more favourable conditions for business expansion.

Capital gains tax drove 11 per cent of those considering emigration, whilst 4 per cent specifically pointed to inheritance tax as their motivation.

Meanwhile, 21 per cent of entrepreneurs indicated they would delay succession decisions pending any future adjustments to inheritance tax policy by the current or subsequent Government.