According to figures from BDO LLP, more than three quarters of Scottish businesses (78%) say they will be impacted by changes to Business Relief for Inheritance Tax (IHT).

The UK government announced changes in the Autumn Budget to the IHT relief available for assets qualifying for Business Relief (BR) and Agricultural Relief (AR). These are expected to come into force from 6 April 2026 but have been met with widespread criticism. IHT is not a devolved tax and so applies to the whole of the UK and Holyrood has no influence.

Under the changes, the amount of relief will be capped, with the first £1 million of qualifying assets exempt from IHT. The excess will attract 50% relief, in effect producing a 20% tax rate.

Draft legislation published in July also confirmed that the £1m allowance won’t be transferable, unlike the unused nil-rate band and residential nil-rate band IHT allowances which can be transferred to a spouse or civil partner’s estate when they die.

Many family-owned businesses are already making plans to mitigate the impact where possible.

A separate survey of wealth advisers conducted by BDO in June found that almost three in five (58%) said their business owner clients were considering gifting shares directly to family members in response to the proposed changes, while just over half (51%) said that settling shares into a family trust was also being considered.

Just over 20% of respondents to the multiple-choice question said their business owner clients were looking at selling up and gifting the proceeds.

Martin Bell, head of tax at BDO in Scotland, said: “These IHT changes have had significant press coverage since October, particularly in relation to the potential impact for farmers.

“There’s no doubt these are seismic changes and individual business owners should review their succession and ownership strategies now, so they’re prepared to act ahead of the new rules coming into force in April next year.”

The impending tax changes add to a growing list of challenges facing Scottish businesses, with skills shortages, overseas trade issues, supply chain challenges, falling demand from customers and tax increases topping their list.

Mr Bell added: “Pressure is mounting on Scottish businesses, with news of rising inflation earlier this month also likely to trigger increased costs, impact customer spending and add to economic uncertainty.

“Our survey shows that a significant number of Scottish businesses (82%) feel their voices are not being heard by the government on important policy measures, with more targeted support needed. The next few months will test that theory as we move towards another Autumn Budget from the UK Chancellor.  Businesses should prepare for tax changes and look to reduce the potential impact.”