Save our family firms: Chancellor urged to scrap inheritance tax raid on businesses

Rachel Reeves is under mounting pressure to scrap an inheritance tax raid that threatens to destroy family businesses across the country.

As the Chancellor puts the finishing touches to her chaotic Budget, she is being urged to reconsider her plan to hit families as firms are passed down the generations .

From April next year, a new £1million limit will apply to those claiming so-called ‘agricultural property relief’ (APR) and ‘business property relief’ (BPR).

The changes will mean an increase in inheritance tax from zero to 20 per cent on assets worth over £1million in a major departure from the rules introduced by then Labour Chancellor Denis Healey in 1976 to protect family firms.

The proposals have already sparked outrage among British farmers – and led to convoys of tractors driving through central London in protest.

Family businesses are now also making their voices in bid to force Reeves into a U-turn.

Writing on the Daily Mail website, family brewer William Lees-Jones warned of ‘a shocking state of affairs’ for family firms, adding: ‘It’s not about money, it’s about a whole way of life being destroyed.’

His concerns were echoed by shadow chancellor Mel Stride who said: ‘Family businesses are the backbone of Britain – the firms that keep our towns, cities and villages working, generation after generation.

‘They are the lifeblood of local economies, yet Labour now threatens to hollow them out with an IHT raid that punishes success and undermines long-term investment.

‘My message to Rachel Reeves is clear: you cannot tax your way to growth. From farms in Yorkshire to factories in the Midlands, these businesses deserve stability, not a Treasury that treats them as a soft target. Britain cannot afford a government that doesn’t understand business.’

Lees-Jones, whose seventh-generation firm JW Lees dates back to 1828 and owns pubs and hotels in the North-West and North Wales, said the proposals have already taken a toll on the business.

‘We have invested £10million in the business this year,’ he said. ‘If we didn’t have the uncertainty of these tax changes we would have invested considerably more, maybe double. As any businessperson knows, there is nothing worse than uncertainty.’

Warning that ‘many family businesspeople inheriting a firm from the previous generation simply won’t be able to pay the multi-million-pound tax bills’, he said: ‘Many firms will end up being sold off in part or wholly to private equity or foreign companies.’

He urged the Chancellor to think again and stop millions of firms being hit.

‘I know no-one in politics ever wants to be seen to be doing a U-turn, but this time it’s the right thing to do,’ said Lees-Jones. ‘Let’s do the right thing by the family firms that are the lifeblood of the economy.’

Family businesses make up around 90 per cent of firms in private sector in the UK and employ close to 16million people.

A report by lobby group Family Business UK warns the reforms will put 208,000 jobs at risk between 2026 and 2029 – costing the government £1.9billion. The potential loss dwarfs the £500million a year the Treasury hopes to bring in from the changes.

‘The sums don’t even add up,’ said Lees-Jones.

Neil Davy, chief executive of Family Business UK, warned the planned tax raid places ‘material uncertainty over the future of many family-owned enterprises’.

He said: ‘Growth is the number one priority of this Government and there isn’t a single business in the country that doesn’t support that ambition. But decisions taken at last year’s Budget, including the changes to inheritance tax for family businesses, have done real harm.

‘Private and family-owned businesses up and down the country have lost confidence. They have pulled back on planned investment and shelved recruitment plans.

‘Next week’s Budget is a chance for the Government to re-set and re-invigorate businesses. It also offers the perfect opportunity to rethink the changes to business property relief.

‘Along with other organisations, we have tabled several workable proposals that work for government and support the model of family business ownership. By working with, rather than penalising the UK’s rich diversity of family firms, the Government holds the keys to unlocking growth.

‘There is still time for the Chancellor to pause and consult on the changes to inheritance tax and work with us, and our members, on sensible alternatives that support growth through long-term business investment, protecting the jobs of working people up and down the UK.’