The family agreement: future-proofing the family business

Employing over 60% of the population, family-run and small businesses are the lifeblood of our communities. Yet, most family businesses do not have a succession plan; the family agreement is the essential framework needed to secure the business’s future. Fear of delegation, reluctance to step away, and postponing difficult conversations are all common in family businesses. But failing to plan your succession could be the most expensive mistake you ever make for you and your family.

Adding to this challenge for NI businesses is the government’s growing focus on inheritance tax (IHT) and the closure of loopholes that previously allowed families to transfer businesses between generations without incurring tax.

What changed in the Autumn Budget?

The introduction of the £1 million cap is the most significant change introduced in the UK’s Autumn Budget. Currently, Agricultural Property Relief (APR) and Business Property Relief (BPR) offer up to 100% relief from inheritance tax (IHT), regardless of the property’s value. From April 2026, this 100% relief will be capped at £1 million per estate, and any value above this threshold will receive only 50% relief, with 40% IHT being applied to the remaining 50%.

A common misconception is that these changes only apply to agricultural businesses. That is not the case. The budget decision changes the landscape for every UK SME, leaving family businesses open to potentially life-changing tax liabilities, substantial risk, and worse yet, a forced sale or liquidation.

What about businesses based in the ROI or cross-border entities?

If your business is ROI-domiciled, the landscape differs. Capital Gains Tax (CGT) at 33% typically applies when a company is sold or transferred, including to children or other family members. With Retirement Relief, if you’re aged 55 to 69, you can pass on your business to your children tax-free on gains up to €10 million. However, once you turn 70, a lower limit of €3 million applies.

For cross-border businesses, succession planning is even more complex, with IHT, CGT, and legal structures all needing careful consideration.

One thing is sure: planning and seeking professional advice are crucial to keeping your family business alive for future generations.

Planning the Future of Your Business, Together

Despite an evolving inheritance tax landscape, you can take back control and protect your family’s future wealth. The best way to start is by taking advantage of our Family Business support available in NI and ROI. Our approach is to begin with developing your Statement of Affairs and facilitating a Family Agreement for signature by family members. The Statement of Affairs captures all your commercial and personal assets and liabilities, as well as any key financial decisions made to date.

The Family Agreement follows, and although it is not legally binding, it outlines the framework and plan of action for the business if you decide (or are forced) to step back. Led by an experienced succession facilitator, family members (working in the industry and outside) get together with key stakeholders to plan for the next generation of ownership. This is an opportunity for the family to outline what the future of the business could look like when the current owners retire. The Family Agreement is essential in every scenario – but it comes into particular focus in families where there is no clear frontrunner for CEO, or where only certain siblings work in the family business.

Our experts guide you through this entire process, removing emotion from what could otherwise be a confrontational discussion and ensuring the best possible outcome for all involved.

Making the Unpredictable, Predictable

What often surprises families during this process is that the final structure isn’t always what they expected. It might involve a straightforward handover to a son or daughter — or it may be that the business would be better led by employees. Having this time to prepare also means you can review life insurance, arrange long-term financing or 10-year instalment plans, and ensure that key documents — such as powers of attorney and wills — are up to date.

Once signed, the family agreement can then serve as the basis for future legal contracts, such as shareholder agreements and employee contracts.

With our expert guidance, families can make informed, financially sound decisions about the future — based on what’s best for both the business and the family — protecting what you’ve built and ensuring your retirement is well taken care of.

With April 2026 just a few months away, now is the time to secure your family’s future and make those critical decisions with our expert guidance. If you have any questions about succession planning and securing your family’s future please do not hesitate to get in contact with Sarah-Jane Murphy or your usual AAB contact.