Family-owned firms call on Chancellor to rethink inheritance tax overhaul

Over 160,000 family businesses and farms urge Chancellor Rachel Reeves to review tighter inheritance tax rules. They warn the new measures risk premature sales, job losses, and a £1.25bn hit to the UK economy. Read more: Family-owned firms call on Chancellor to rethink inheritance tax overhaul

Dec 17, 2024 - 21:00

Family-owned firms call on Chancellor to rethink inheritance tax overhaul

Family-owned businesses accuse Labour of dishonesty over potential tax hikes, warning that changes to inheritance tax reliefs could force closures and threaten British enterprise.

The owners of tens of thousands of family-run businesses and farms have urged Chancellor Rachel Reeves to revisit the inheritance tax changes announced in her recent Budget, warning they could trigger forced sales, job losses, and a marked reduction in investment.

In an open letter sent over the weekend, Family Business UK—representing 32 trade associations and about 160,000 family enterprises—called on Reeves to consult more widely and consider the longer-term fallout of the new measures.

These changes, set to take effect from August 2026, tighten inheritance tax relief so that family businesses passing on more than £1 million of assets will face a 20 per cent levy. The Office for Budget Responsibility estimates this will raise £520 million by 2029-30. However, Family Business UK argues the measures could lead to a £1.25 billion net fiscal loss due to diminished activity and job cuts.

Neil Davy, the organisation’s chief executive, described the reforms as a “hammer blow” to enterprises that often form the backbone of local economies. “In many cases, heirs may have no option but to sell up rather than continue running the business,” he said. “This risks driving valuable British assets and family farms into the hands of overseas buyers who pay little to no tax here.”

The letter also noted that some family business owners have postponed investment and frozen recruitment, as staff grow anxious about future impacts on their livelihoods.

Family Business UK is calling on the Chancellor to initiate a formal consultation on the policy, seeking a constructive solution that preserves the long-term interests of these enterprises and the jobs and investment they support.

While Labour maintains it must restore public finances after inheriting a multibillion-pound funding gap from the previous government, the letter’s signatories insist that tax reforms should not come at the expense of Britain’s family-owned economy.