IHT raid on family firms pays for just half a day’s welfare spending

The ‘punitive’ inheritance tax raid on family firms will harm the economy and raise less than half a day’s spending on welfare, Rachel Reeves has been warned.

Business leaders are making a last‑ditch appeal to the Chancellor to scrap plans to impose a 20 per cent inheritance tax on family businesses and farms from April next year. They argue the levy will hit jobs, investment and growth – but fear Reeves will ignore them when she delivers the Spring Statement tomorrow.

Campaign group Family Business UK (FBUK) says the policy will raise just £300m, compared with £334billion spent on welfare this year. Neil Davy, FBUK’s chief executive, told the Mail: ‘The only thing Britain’s family businesses can expect from the Spring Statement are new estimates of how much money the family business tax may, or may not, raise.’

He warned that even if the Treasury secures the full £300m a year, the wider hit to business activity would far outweigh the gain. ‘This tax is forcing businesses to cut investment and jobs, to downsize and sell assets,’ he said.

The row began after Reeves used her first Budget in 2024 to make sweeping changes to agricultural property relief (APR) and business property relief (BPR).

Under the reforms, family firms and farms would face 20 per cent inheritance tax on assets above £1m. Protests swiftly followed, including a convoy of tractors through central London. Reeves later raised the threshold to £2.5m, or £5m for married couples, in a pre‑Christmas U‑turn. But the move has not eased concerns across the sector.

‘Amendments announced before Christmas are a welcome step,’ Davy said. ‘But, even so, our research suggests that less than 10 per cent of family businesses believe they will fully escape inheritance tax.’

He argues the policy leaves Britain’s 5m family firms at a competitive disadvantage because foreign and non‑family‑owned rivals do not face equivalent charges.

With the tax due to come into force in a month’s time, FBUK says tomorrow’s statement is the Government’s final chance to show it supports the businesses that form the backbone of Britain’s economy.