Inheritance Tax Changes Still Threaten UK Business Continuity

Following the Labour Government’s Spring Statement, businesses may find reassurance in the Chancellor’s decision not to announce further tax increases, providing short-term stability. However, concerns remain over previously announced changes to inheritance tax reliefs.

Peter Mills, Business Tax Director, comments:

“On the one hand, individuals and businesses may be reassured that the Chancellor does not seem to have proposed any more tax increases at the Spring Statement, providing some degree of stability. It is nonetheless disappointing to see that the government has not listened to concerns raised from various sources as to the potential consequences for businesses of the changes introduced in October last year, including those limiting key reliefs that allow businesses to be passed on death, free of inheritance tax.

These changes, effective from 5 April 2026, continue to cause huge concern for a number of business owners and entrepreneurs. The imposition of potentially significant inheritance tax charges on death is likely to force owners to divest of assets prematurely, or otherwise may have adverse effects on business continuity. This will undoubtedly have wider ramifications, including for customers, suppliers, employees and other key stakeholders. Recent studies also suggest that twice as many UK businesses are bought by foreign investors than by UK businesses*, a trend which could worsen if owners and their inheritors are forced to sell assets earlier than intended, with the potential that wealth and value will continue to evaporate from the UK with longer lasting implications for the economy and growth.

Whilst the possible impact on UK agriculture, and the importance of that particular sector, has resonated with the public, what seems to also have been somewhat lost in mainstream media coverage is the potential impact on UK businesses more generally. For those concerned about these changes, there is still a limited window of opportunity between now and April 2026, during which certain inheritance tax mitigation strategies may still be feasible. With the future landscape now clear, and it looking increasingly likely that the government will not waiver on these changes, we would strongly encourage business owners to consider their succession plans well in advance of then.“

Welcome Clarity on R&D Tax Relief with Advance Assurance Plan

Anthony Lalsing, Head of R&D tax incentives, comments:

“The Spring Statement confirmed that HMRC will consult on widening the use of advance clearances in relation to R&D tax reliefs. After a tumultuous period for innovative companies and their advisers with a pay now, query later approach from HMRC, increased “advance assurance” around the validity of R&D claims and future tax credit repayments will be welcomed by many.”

Failure to Deliver Support for Struggling Businesses

Despite downgraded growth forecasts and expectations of rising inflation, the government announced no new support for businesses—particularly concerning with national insurance increases looming.

Richard Godmon, Head of Tax services, comments:

“The Chancellor today offered little to boost business confidence. Growth forecasts have been cut, inflation is forecast to rise again, and yet there was no new support for employers facing a mounting cost burden with national insurance rises just around the corner.

Calls for ‘Change’ and an unwavering commitment to stability were largely ignored, alongside meaningful tax relief and incentives for investment, and many are bracing for tough months ahead. The risk of a spike in business failures is real if the pressure they are under does not ease.

If the Government is serious about delivering growth, it needs to reduce the cost burden on businesses and do more to support job creation, innovation, and investment, in a time where they are crying out for help.”

HMRC Funding Boost Risks Burdening SMEs Without Closing Tax Gap

Today’s Spring Statement announcement focused on tackling tax evasion and avoidance, with £1bn expected to be raised by 2029 through increased HMRC funding. However, concerns were raised over the true impact, as operational costs and inefficiencies may reduce the net gain. With the tax gap still at nearly £40bn and HMRC facing tribunal backlogs, more funding alone may not improve enforcement. The Tax Disputes & Disclosures team warned that SMEs could face increased compliance pressure, becoming default targets without meaningful progress in narrowing the gap.

Matt Watkins, Tax Disputes & Disclosures Director, comments:

“Tax evasion and avoidance were clear targets in the Chancellor’s Spring Statement, with significant investment pledged to boost HMRC’s ability to close the ‘tax gap’. While this is expected to raise £1bn by 2029, the real tax take will be far lower once penalties, recruitment, and operational costs are factored in.

The tax gap still stands at nearly £40bn, and this announcement alone won’t come close to closing it.

 More staff and funding don’t automatically lead to more effective enforcement, especially with HMRC already facing a backlog of tribunal cases.

There’s also a real risk that SMEs, which often lack in-house tax expertise, will become the default target. This would increase compliance pressure on businesses that are already stretched, without necessarily improving outcomes.”

The Government’s Spring Statement outlined reforms to boost housebuilding and invest in construction skills, including changes to the National Planning Policy Framework and £625 million in funding for training initiatives across England. These measures aim to increase housing output by 30% by 2029–30 and support long-term infrastructure growth.

However, while positive in intent, the Property & Construction team cautions that the benefits will take time to materialise—and pressing issues like rising construction costs and sector insolvencies remain unaddressed.

As we expected, today’s Spring Statement brought few surprises Hospitality & Leisure sector. Hopes for cuts to announcements in the Autumn Statement, such as rise in employers national insurance, were dashed. Instead, the main focus was on public spending cuts and injections of funding into other sectors.

Today’s Spring Statement highlighted businesses may endure a potentially turbulent time in the upcoming years with adjustments to forecasts on growth and inflation.

As predicted, there were no major announcements relating to tax rules, with the government committing to one major fiscal event per year, in the autumn. Sadly for tech businesses, there was no u-turn on the NICs rate or threshold changes. This means that the secondary threshold will be reduced to £5,000 as of 6 April 2025, bringing more employee wages into the scope of employer NICs, and the rate at which employers pay NICs is increasing from 13.8% to 15%. This will be unwelcome news for those in the tech sector particularly in the start-up and growth phases where margins could be significantly impacted and hiring and remuneration policies may need to be reconsidered.

SMEs will welcome the announcements around defence spending and particularly the simplifying of the procurement process that often prevents SMEs from tendering for projects. 

The devil will be in the detail and its real world implementation and one of the challenges will be how to ensure security of data and technological secrets and whether this will limit the ability of SMEs to secure contracts.

The Spring Statement 2025 didn’t have any surprises for the Transport and Logistics sector, with opportunities arising from infrastructure investments and workforce development initiatives, alongside challenges posed by increased taxation announced in the Autumn Budget and a moderated economic growth outlook.

The increase in the National Minimum Wage and Living Wage will significantly impact the retail sector, which employs a large proportion of minimum-wage workers. Retailers, already grappling with rising energy costs and business rates, are likely to see further strain on profit margins due to higher wage expenses. The potential effects on human capital include pay compression, reduced hiring, fewer employee hours, and a greater push towards automation and technology adoption. Retailers may struggle to absorb these rising labour costs, meaning they may need to pass them on to customers, which could reduce demand—especially in highly competitive sectors like food retail.

The government’s Spring Statement, as a reaction to market conditions and internal budget concerns, did not address specific measures to help retail businesses facing escalating costs. With the Labour Party committed to only one budget per year, the statement focused more on government spending and deficit reduction. To support the retail sector and encourage economic growth, additional measures could include business rates reform (which is under review), employee cost relief through increased subsidies, support for independent retailers via affordable loans or grants, and initiatives to encourage digital transformation through training and subsidies. These measures could help retailers drive innovation, create jobs, and enhance their competitiveness in the market.