Editor's note: This brief was summarised by The Property AI Team from a report by Property118. Read the original article for full details.
Landlords Warn Family Business Handovers Could Cost More After Budget
Reports that handing over a family company could become more expensive after the next Budget have struck at the ambition of landlords who built businesses for their children. The Telegraph has reported that changes being considered ahead of the Budget could make some family business handovers more expensive.
The concern involves arrangements where a departing owner receives payments for shares as part of passing the business on. Payments currently treated as capital could instead be taxed as income. Depending on the circumstances, that could mean a larger bill and less money left for retirement.
For a landlord who has spent years building a property company, the immediate question is personal: will passing responsibility to my children now leave me with less to live on? That is a serious concern. It is not the same as announcing a new tax on every parent who gives their children shares.
Why this feels like moving the goalposts
A family business can represent decades of saving, borrowing, repairs and financial risk. Its owner may have accepted those responsibilities partly because the business would eventually support the next generation. Property also creates a particular problem: wealth on paper does not necessarily mean cash in the bank. A company can own valuable buildings while still needing its rental income to meet mortgage payments, maintenance bills and other costs. If a handover requires more cash for tax, where does that money come from? Further borrowing? A smaller retirement income? Selling a property the family intended to keep? These are possible consequences to examine, rather than outcomes we can already predict.
What the official documents actually say
The underlying document is HMRC's consultation on modernising the distributions framework. In ordinary language, it examines how money and capital taken out of companies should be taxed. The consultation closed in September. As at 20 October 2026, the proposals should not be presented as an enacted tax change. Some proposals could affect arrangements used when owners retire or reorganise a business. The accountancy body ICAEW has raised concerns about their commercial consequences.
There is therefore a substantive issue behind the headlines. Equally, the documents do not establish a blanket 45% charge on the value of every family business handed to children. Giving away shares, receiving payment for shares and recovering money genuinely lent to a company are different transactions. They need separate tax analysis. Existing taxes can also apply, even where these proposals are irrelevant. For landlords, another important distinction is that some existing reliefs require a trading business. Owning a rental company does not automatically meet that requirement.
Source: Property118