Family-run construction firms in Scotland are warning of dire consequences from upcoming inheritance tax reforms set to take effect in April 2026. Industry leaders and business owners fear the changes could force closures, sales, or downsizing of generational businesses, jeopardising jobs, local economies, and the government’s housing targets.
The reforms, introduced in the Chancellor’s Autumn Budget, will cap Business Property Relief (BPR) at £1 million. Previously, qualifying businesses could be passed on without any inheritance tax liability. Under the new rules, assets exceeding this threshold will only qualify for 50% relief, with the remaining value taxed at an effective rate of 20%—a significant burden for asset-rich but cash-poor businesses.
Richard Beresford, Chief Executive of the National Federation of Builders (NFB), expressed grave concerns about the impact on construction firms. “Construction companies are generational businesses operating on tight margins and uncertain cash flow. Early conversations with members highlight that some will consider closing their businesses, changing operations, or cutting back,” he said. Beresford warned that such decisions would lead to workforce insecurity, a loss of experience and talent, and potentially fewer local investors if businesses are sold to external buyers.
Rico Wojtulewicz, Head of Policy at the NFB, echoed these sentiments: “Family firms need every penny they can get. With so many considering succession planning, the budget changes to inheritance tax will see many businesses choose to close or sell up rather than be passed on.” He added that this could threaten the government’s target of building 300,000 new homes annually.
Economic Ripple Effects
The construction sector’s struggles mirror those of other industries affected by the reforms. Mark Anderson, Managing Director of GAP Group—a family-owned plant hire company—highlighted how taxing asset value rather than profitability creates liquidity challenges. “This presents difficulties for firms needing to liquidate assets to pay taxes,” he explained. Anderson also emphasised the long-term planning and employee loyalty that family-run businesses bring to local economies.
Industry leaders are urging the government to reconsider the reforms. Beresford warned: “This government risks being remembered as the one that closed the businesses who build our homes and infrastructure.” The NFB and other organisations are advocating for an increase in the £1 million cap or a delay in implementing the changes to allow businesses more time to prepare.
Experts stress that affected business owners must act swiftly to mitigate potential tax liabilities. Strategies such as restructuring ownership or utilising trust mechanisms are being explored. However, these solutions require careful planning and may not fully offset the financial strain.
With family-owned construction firms forming a backbone of Scotland’s economy and contributing significantly to housing and infrastructure projects, their survival is critical. As April 2026 approaches, uncertainty looms over how many will weather this storm.
