Chartered Accountants Ireland is warning that family-owned businesses in Northern Ireland, including those in the agricultural sector, will be the biggest losers from the recent tax changes announced in the Autumn Budget.
Impacted family businesses are now facing a triple whammy of mounting employment costs, higher Capital Gains Tax on sale or succession, and an unexpected Inheritance Tax bill when passing businesses on to the next generation.
Commenting, Janette Burns, Chair of the Institute’s Northern Ireland Tax Committee said: “Northern Ireland family-owned businesses are the heartbeat of our economy with around 80% of businesses here either family owned or managed. Many of these businesses, particularly those who employ minimum wage workers, will face a stark increase in their wage bill from April 2025 as a result of the changes to Employer’s National Insurance Contributions and the National Minimum Wage.
“For example, a business with 50 part-time staff aged 18-20 working around 15 hours per week will have to find an additional £65,000 from April 2025 just to pay wages. This will particularly impact businesses reliant on part time staff such as in the retail and care sectors but especially for already struggling hospitality businesses.”
Reflecting further on what’s still to come for Northern Ireland family-owned businesses, Janette commented: “From 30 October 2024 the rates of Capital Gains Tax have already increased from 10% to 18% and 18% to 24% ahead of a stepped reduction in the benefit of a key Capital Gains Tax relief, Business Asset Disposal Relief, commencing from April 2025. Then, from April 2026 the benefit of two key Inheritance Tax reliefs is being reduced by 50% for businesses (including farms) worth more than £1 million.
“This means that further down the tracks the same family business owners are facing a significantly higher tax bill when the time comes for the next generation to take over.
“Those who are approaching retirement will now pay more Capital Gains Tax either when they sell the business or pass it on to their successors whilst still alive. On a death transfer, the Budget’s Inheritance Tax changes from April 2026 mean that whoever inherits the business will be hit with an extra 20% Inheritance Tax bill on any value over £1 million. Figures suggest that an estimated 33% of farmers in Northern Ireland will be affected.
“Many family-owned businesses and farms here started out small 20 or 30 years ago and through sheer hard work, sacrifice, and determination have grown in size. It would not be unusual for those businesses to now be worth several million pounds.”
“For a business or farm worth £2million, these changes will add as much as £200,000 onto the family Inheritance Tax bill. The reality is that many will be forced to sell the business or farm to pay this new bill.”