On 6 April — five days from now — the most significant changes to inheritance tax in a generation come into force. And if you run, advise, or invest in a family-owned business, you need to understand what’s about to hit.
The headlines have focused on farmers. But the real carnage may be in a sector nobody’s talking about: construction. Specifically, the plant-hire firms that supply every crane, excavator, and concrete mixer that physically builds the country. Without them, nothing gets built. Literally.
What’s Changing
The reforms target agricultural property relief (APR) and business property relief (BPR) — two long-standing reliefs that have historically allowed family businesses and farms to pass from one generation to the next without being carved up to pay inheritance tax.
Under the new rules, any inheritance above a £2.5 million threshold will face an effective tax rate of 20 per cent. The threshold was raised from an initial £1 million after significant pushback — but for capital-intensive businesses, £2.5 million evaporates fast.
Consider a typical plant-hire firm. A single tower crane can cost north of £500,000. A fleet of excavators, telehandlers, and dumpers — the bread and butter of any mid-sized construction supplier — can easily push a business’s asset value past the threshold, even if the actual cash in the bank account wouldn’t cover a quarter’s payroll.
The Construction Plant-hire Association (CPA) has put numbers to the anxiety. Six in ten of its 2,000-plus members are already cutting back on investment in equipment and machinery. A third are cutting back on hiring. And the changes haven’t even taken effect yet.
The Perverse Incentive
Here’s the structural problem that makes these reforms particularly damaging for capital-intensive businesses.
When a family firm’s value sits primarily in physical assets — plant, machinery, equipment — the owner faces a brutal choice. Invest in new kit, grow the business, serve more contracts, employ more people, and watch the IHT liability climb with every purchase. Or deliberately suppress investment, let equipment age, avoid growth, and keep the taxable estate under the threshold so the next generation inherits a viable business rather than a tax bill.
The CPA’s members are overwhelmingly choosing the second option. And why wouldn’t they? The construction industry already has the highest capital-to-revenue investment ratio of any UK sector — more than double the next closest. Every pound of growth adds disproportionate IHT exposure.
This is the opposite of what a growth-focused government should want. You can’t build 1.5 million homes with an ageing fleet. You can’t deliver HS2 or the new nuclear programme with firms that are deliberately shrinking to dodge tax.
The Timing Could Hardly Be Worse
These reforms are landing at the worst possible moment. The Iran conflict has disrupted shipping through the Strait of Hormuz, pushing construction material shipping costs up by 20 to 100 per cent, according to the Builders Merchants Federation. Energy costs are surging. The OBR has forecast net housing additions dropping to 220,000 in 2026/27 — well below the government’s target pace.
Family-run construction firms are facing a genuine “cost of doing business” crisis, with IHT reform now adding a generational threat on top of the cyclical pressures. As the BMF’s chief executive put it: “There are no green shoots of recovery on the horizon.”
It’s Not Just Construction
Plant-hire is the canary in the coal mine, but the same logic applies to any capital-intensive family business: manufacturing firms with expensive tooling and factory equipment, logistics companies with vehicle fleets, agricultural businesses (who’ve been louder about this, with good reason), and specialist engineering firms.
The common thread is that these businesses hold their value in productive assets, not cash or financial instruments. An IHT regime that treats a £3 million fleet of cranes the same as a £3 million share portfolio fundamentally misunderstands how these businesses work. The cranes are the business. Selling them to pay the tax bill doesn’t release idle capital — it destroys the company’s ability to trade.
What the Government Says
The official line is that raising the threshold to £2.5 million “protects more small family businesses, while ensuring the largest make a fair contribution.” That framing only works if you define “small” by the number of employees rather than asset value. A 15-person plant-hire firm with 40 machines can easily breach the threshold. They’re not large by any meaningful measure — just capital-heavy.
There’s a philosophical argument to be had about whether business property relief was always too generous. Perhaps. But the solution should account for the difference between a family hoarding appreciating property and a family reinvesting every pound into productive equipment that employs people and builds things.
What Advisers and Business Owners Should Be Doing Now
With five days to go, here’s the practical checklist:
Get a current valuation. Not a back-of-envelope estimate — a proper valuation of the business, including all plant, equipment, goodwill, and liabilities. You cannot plan around a threshold you can’t measure against.
Review ownership structures. Trusts, family investment companies, and lifetime gifting strategies all need to be revisited in light of the new rules. The seven-year rule for potentially exempt transfers hasn’t changed, but the calculus of what to gift and when has shifted dramatically.
Model the scenarios. What’s the IHT liability today? What does it look like if the business grows as planned? What if you sell certain assets? Run the numbers with your adviser and stress-test against realistic growth assumptions.
Consider insurance. Whole-of-life insurance written in trust remains one of the most straightforward tools for covering an anticipated IHT liability without requiring asset sales on death. It’s not glamorous. It works.
Document everything. With HMRC’s new sanctionable conduct regime also taking effect this week — giving the revenue unlimited penalty powers and the ability to publish adviser details online — the bar for documentation and defensibility has never been higher. Keep detailed records of every planning decision and the commercial rationale behind it.
Talk to the next generation. This is the conversation nobody wants to have, but it matters more than ever. If the plan is for a son or daughter to take over the business, they need to understand the tax position, the insurance arrangements, and what happens if the worst case materialises. Succession planning is business planning.
The Bigger Picture
What makes this story particularly frustrating is that the government’s own priorities are working against each other. You cannot simultaneously pursue a massive housebuilding programme, an infrastructure investment push, and a defence spending increase while taxing the family businesses that deliver those things into penalising their own growth.
The CPA and other trade bodies are calling for a reversal. That seems unlikely given the fiscal pressure. But at minimum, a more nuanced approach — perhaps a higher threshold for demonstrably productive business assets, or a phased payment regime tied to continued trade — would acknowledge the difference between passive wealth and working capital.
For now, though, the clock is ticking. 6 April is five days away. If your estate planning hasn’t caught up with the new reality, today is the day to start.
If you need help navigating the IHT changes and their impact on your business succession planning, get in touch. Tanous Limited advises owner-managed and PE-backed businesses on exactly these issues.