Inheritance tax is a tax imposed on the estate of a deceased person before the assets are distributed to their heirs. It is based on the value of the assets left behind by the deceased individual.

Inheritance tax can have a significant impact on family businesses, as the tax liability can be substantial depending on the value of the business assets. This can put a strain on the financial resources of the business and may even force the family to sell off assets or take out loans to cover the tax bill.

There are certain exemptions and reliefs available for family businesses when it comes to inheritance tax. For example, business property relief can reduce the value of a business or its assets for inheritance tax purposes. Additionally, there is a special relief called Agricultural Property Relief for qualifying agricultural property.

Family businesses can engage in estate planning to minimize the impact of inheritance tax. This may involve setting up trusts, gifting assets during their lifetime, or restructuring the business to take advantage of tax reliefs. Seeking advice from a financial advisor or tax specialist can help family businesses navigate the complexities of inheritance tax planning.