Keeping it in the family: planning ahead for business succession

At a glance

• Prepare. Plan business succession as early as possible. This can help ensure the process is smooth when the time comes, maximising value and tax efficiency.
• Understand the value. Succession planning starts with accurately calculating the value of your business.
• Communicate. Take time to have regular, open and honest conversations with all family members about your plans and intentions. 

Achieving a successful handover of your business to a family member typically comes down to three aspects: early planning (ideally five to 10 years in advance), having a full understanding of the value of the business, plus open communication with all involved parties to ensure fairness.

It’s not just about passing on ownership of your company. Succession planning is also about the future leadership and management of your business. And these things won’t necessarily lie in the same hands.

Developing the next directors and leaders for your business, if they are to stay within the family, could take several years.

Chris Everard, business growth adviser at business advisory company Elephant’s Child, says: “One of the greatest misconceptions in family business succession is that it’s simply about passing ownership from one generation to the next. In reality, it’s about preserving two things simultaneously – the future value of the business and the family’s long-term wealth.”

Chris advises that the best first steps are to get an accurate valuation of what your family business is worth. Without an objective valuation, conversations around retirement, gifting, inheritance, tax planning and estate planning are based on assumptions.

Following this, it’s important to think about what success looks like for your specific family situation.

A broad range of different scenarios are possible, including a business owner’s children owning and running the business together, or the children owning the business but having it managed and run by just one family member, or someone else from outside the family, for example.

Once the succession plan is clear, the business owner can work backwards to ensure the preparation and work is done early to achieve the best outcome for the family business.

“It could involve investment in training up the next generation of the family to ensure they can effectively run and lead the business,” says Chris. “Another option might be that the owner focuses their time instead on growing the business with a view to selling it outside the family to maximise its value and pass on wealth that way.”

Tax implications of succession

Depending on your chosen route and strategy for passing on your business, there will be different tax implications. This is where expert advice can be helpful to highlight the different options and their relative tax liability, bearing in mind that tax rules are liable to change at any time. This includes taxation levels and rates and reliefs.

For the purpose of calculating inheritance tax, business assets are included with your personal wealth following death, so it is important to bear this in mind when doing broader financial and estate planning.

Business relief, which offers 100% relief on IHT for eligible business assets, when transferred during your lifetime, or after death, can enable a tax-efficient transfer of your family business. But exclusions and restrictions apply, including the requirement that you have owned the business for at least two years.

There is also a £2.5 million cap for the 100% level of business relief. However, business relief at 50% applies on qualifying business property, shares, land, buildings and machinery, above the £2.5 million allowance.

Again, it’s important to be aware that tax relief and rates are liable to change at any time. This is when ongoing advice can be important. 

Chris at Elephant’s Child says: “Business relief, capital gains tax and IHT matter, but they should support the family’s objectives, not drive them. The real aim is converting business value into family wealth.”

Many business owners have a large proportion of their wealth tied up in property and shares. While this can create significant value, it can also make it harder to pass on wealth during your lifetime. 

Passing on assets to loved ones can become free from IHT if you live for seven years after making them, but releasing assets to make those gifts is not always straightforward. Tax rules, including the seven-year rule for potentially exempt transfers (PETs), could also be changed at any time.

Alternative options, such as trusts, may be worth considering.

If a business owner decides to sell their business outside of the family, then capital gains tax is another important consideration.

Achieving fairness

Passing on a family business will rarely be straightforward, particularly if you have more than one beneficiary, a blended family, or where some of your children are actively involved in the business, while others are not.

It can be a delicate balance ensuring succession occurs in the way you wish, to protect the business, but also in a way that feels fair for everyone.

In some cases, family succession may not be the right outcome, and this will also need to be worked through and explained.

Chris at Elephant’s Child believes early and open communication is key to success in this area. He says: “Silence creates assumptions. Families should discuss aspirations, roles, and expectations openly. A fair outcome may not always mean equal shares, depending on involvement with the business. But honest communication can help to smooth the path.”

Exit Strategies may include the referral to a service that is separate and distinct to those offered by St. James’s Place.

We work in conjunction with an extensive network of external growth advisers and SME specialists, such as Elephants Child, who have been carefully selected by St. James’s Place. The services provided by these specialists are separate and distinct to the services carried out by St. James’s Place and include advice on how to grow your business and prepare your business for sale. Where the opinions of third parties are offered, these may not necessarily reflect those of St. James’s Place.

SJP Approved 10/08/2026