Here’s a chance to get succession planning right for everyone
Kathryn Johnston looks at the sticky business of keeping firms in the family
Scotland is fortunate to have a thriving community of family-owned businesses. According to gov.uk, at the beginning of 2025 there were 361,000 private companies in Scotland, with an estimated 75 per cent being family-run. From local employers to multi-generational success stories, these businesses drive growth, create jobs and make meaningful contributions to communities.
Yet for many owners, building a successful business is only part of the story. After long hours, personal sacrifices and years of dedication comes the question: what steps should be taken today to secure the future of the business?
Before 6 April 2026, provided a business was trading rather than held primarily as an investment, business owners did not generally need to consider inheritance tax (IHT) implications of succession to the same extent. This was because qualifying trading businesses could benefit from 100 per cent Business Relief (BR), previously known as business property relief, meaning a full exemption from IHT.
That position has now changed. BR, alongside its “sister”, Agricultural Property Relief, has been restricted, with 100 per cent relief now capped at £2.5 million. Public debate has focused on the impact on farmers, but the changes are equally relevant to those who spent generations building family businesses beyond the agricultural sector.
The new rules are bringing long-standing succession questions into sharper focus:
- Who wants to take the business forward?;
- Who should take the business forward?;
- How should ownership and control transition?;
- What does the future of the business look like?
These questions become particularly relevant where business owners have children. For a business owner with one child, who shares a parent’s views and involvement in the day-to-day running of the business, this can be relatively straightforward. Some or all of an interest can be handed over during lifetime, maximising IHT relief, and nothing else changes. However, matters are not generally so simple.
Where the child does not share the same views regarding the evolution or future of the business, there is a risk in passing on control. Where there are multiple children, questions arise around their involvement in the business. Perhaps the most difficult question of all: how do you achieve a fair division between children when one is actively involved in the business and others are not?
Fair does not necessarily mean equal. A child who has worked in the business may have invested years of their career helping to build its value, potentially on a low wage, while a child outside the business has not. Trying to divide the business equally may not always be the fairest or most practical solution. Doing so creates uncertainty over control or leaves a business vulnerable to future disagreement.
Planning must look beyond the business itself and consider wider family wealth. The challenge is not simply deciding who gets what, but having an open conversation about what each child considers fair, why that is, and whether this aligns with the parent’s position. These are difficult, but essential, conversations.
Perhaps the greatest opportunity presented by the changing IHT landscape is not simply to revisit the tax position, but to use it as a catalyst to address succession properly, to make deliberate, informed decisions, creating a legacy of clarity, confidence and continuity for the next generation.
Kathryn Johnston is a Senior Associate, Gillespie Macandrew