Agency owners thinking about passing on their businesses to their families should act before April 2026, or face losing a portion of their estate to new taxes.
Changes to inheritance tax relief announced in last year’s autumn Budget will kick in on 6 April, White Hart Associates head of travel and leisure Chris Photi told TTG.
While much of the debate around inheritance tax has centred on farmers losing agricultural relief on certain assets, the same changes have been introduced to business relief, with potential consequences for travel businesses.
The government published its draft legislation in July, confirming the amount of relief available will be capped when passing on a business.
This means, like for farmers, the first £1 million of qualifying assets will be exempt from inheritance tax while the excess will attract only 50% business relief, as opposed to the current 100% – effectively introducing a 20% tax rate.
“It’s a reasonably civilised rate of tax, but not when you used to pay none,” said Photi. “We’ve got some lead-in time so there is an opportunity to plan. People are divesting themselves of assets and giving them away so they don’t have to include them in their inheritance.”
Gifting, Photi stressed, is just one way business owners can avoid chancellor Rachel Reeves’ new taxes, and requires those gifting assets to live on for a further seven years to ensure it is tax free.
Different psyche
He added there were other options available to business owners, with each business likely to require its own unique solution. “It’s sensible to do the planning – a lot of people are using the time between now and April to do things to keep money out of the chancellor’s hands.”
DMH Stallard head of private client Nadia Cowdrey agreed the new legislation is set to make a significant impact. “It’s changed the entire psyche of how British business owners consider what they are going to do in the future,” she said.
Chris Photi and Nadia Cowdrey are encouraging agents to act sooner rather than later
“Business relief was never a relief to favour the wealthy – there were logical reasons for allowing trading companies that employ staff not to be hammered by tax when the owner dies.”
Cowdrey, though, said that despite the new legislation taking shape, there seemed to be some reticence to do anything about it. “Business owners are avoiding knee-jerk reactions when tax isn’t quite favourable, and people think there could be another new government in the next few years, so it’s quite difficult to plan in that scenario.”
'Difficult decision'
Thorne Travel director Shona Thorne said succession planning was on her mind long before the government introduced the new legislation, even though it was tough to do.
In October 2023, she gifted minority stakes in the business to retail director Christiane McCorgray and cruise director John Ferguson in recognition of their contribution to Thorne Travel’s success, with the option to buy more.
Thorne added: “It’s a very difficult decision, but one better to be made before it’s made for you – no one knows what’s around the corner.”
Meanwhile, founder and chief executive of Attraction Tickets, Oliver Brendon, has handed his business over to his team by setting up an Employee Ownership Trust that affords every member of staff a share in bonuses worth more than £1 million in total.
Shona Thorne and Oliver Brendon are two travel entrepreneurs who have had to think about how they pass their businesses on
“It’s appealing from a tax perspective, it’s appealing from a shared value perspective and it’s appealing from a succession perspective,” he said. “It enables shareholders to walk away slowly and gracefully in their own time.”
Photi added that, with further tax increases possible, his advice to business owners would be to plan now and get their affairs in order. “I’m expecting her [Rachel Reeves] to tax us all to the hilt [in the next Budget],” he said.
