‘Hammer blow’: Family firms call for inheritance tax consultation
Family businesses are urging the government to consult on changes to inheritance tax (IHT), warning the move represents a “hammer blow” to the UK economy.
Some 160,000 family-owned firms – represented by 32 trade associations – have written to Chancellor Rachel Reeves to request a formal consultation on IHT changes in the Budget.
The letter, led by Family Business UK, warns that changes to business property relief (BPR) and agricultural property relief (APR) will deprive the economy of investment and result in forced, premature business sales and job losses across the UK.
According to independent economic modelling by CBI Economics, the changes to BPR alone could see a £1.25bn net fiscal loss to the Treasury and some 125,000 job losses.
Neil Davy, Family Business UK chief executive, said: “The changes to IHT for family businesses and farms are a hammer blow.
“In many cases, those inheriting the business will have no alternative but to sell up when the owner dies, rather than continue running the business.
“In these circumstances, there is a real risk that businesses, assets and farms will be sold to foreign-owned competitors or investors who will pay little to no tax in this country.”
Budget backlash
He added: “Already, family business owners are taking decisions to withhold planned investments and are putting recruitment on hold. Those working for family businesses are also extremely concerned, worried about how these changes might impact them.
“We do not believe that these are the outcomes the government envisaged.”
The 32 trade associations who are signatories to the letter include: the British Beer and Pub Association (BBPA); the Countryside Land and Business Association (CLBA); Hospitality UK; the Home Builders Federation (HBF); the National Farmers Union (NFU); and the Wine and Spirit Trade Association (WSTA).
As a result of the Budget, from April 2026, inherited agricultural assets worth more than £1m, which were previously exempt, will be liable to IHT at 20 per cent, half the normal rate.
It prompted major backlash from the farming community, with many arguing the threshold of £1m is set too low as the price of agricultural land is inflated compared to the actual profit.
‘Resolute commitment’
The CBI Economics modelling suggests family businesses mitigating the cost of a potential future IHT bill would be most likely to reduce investment and employment leading to average investment cuts of 16.5 per cent and average employment cuts of 10.2 per cent.
There are 4.8m family businesses in the UK employing almost 14m people and contributing more than £200bn a year in tax revenues, Family Business UK has stressed.
But a HM Treasury spokesperson said: “Our commitment to business is resolute – we have capped corporation tax at 25 per cent, confirmed full permanent expensing, and are committed to working together with business to unlock more growth opportunities for our country.
“With our public services crumbling, a £22bn inherited fiscal black hole, and only 158 estates benefiting from over half a billion pounds in BPR in 2021-22– more than half the total value – we had to make difficult choices to fix the foundations of the country and restore economic stability so businesses can thrive.”
They added: “We have set out our modelling on the impacts of the changes to BPR at the Budget, and, as is standard practice, we will publish further analysis of the impacts alongside the draft legislation expected in 2025.”