Labour is warned their inheritance tax raid will devastate family-run companies as well as farms_Nhy
Labour’s Inheritance Tax raid will devastate family-run companies as well as farms, ministers are warned today.
Analysis has found that the introduction of death duties on the assets of family-owned firms could lead to as many as 125,678 job losses over the next five years among mostly small businesses and reduce economic activity by £9.4billion.
That would mean the Treasury losing out on £1.3billion by 2030, according to calculations by CBI Economics, damaging Government coffers as well as the economy.
A survey carried out by the consultancy also finds that one in five family firms expects to have to take action to avoid the new Inheritance Tax liability of 20 per cent on assets worth more than £1million.
As many as 15 per cent who expect to be hit say they will sell up completely, while even those below the threshold plan to reduce investment or cut jobs.
The introduction of the cap on Business Property Relief, meaning that owners of family firms will have to pay Inheritance Tax if they want to pass shares or other assets to the next generation, mirrors changes to Agricultural Property Relief that have sparked angry protests from farmers.
Last night Neil Davy, chief executive of Family Business UK which commissioned the research, said: ‘Just as we’ve seen among the farming community in relation to APR, changes to BPR announced in the budget will fundamentally remove incentives among owners of family firms to invest in their businesses, and in many cases threaten their viability.
‘The CBI Economics research concludes this will come at the expense of jobs, investment, and tax receipts into the Treasury. Downsizing of businesses, asset disposures, complete sale or liquidation are very real unintended consequences of this policy.’
Rachel Reeves’ inheritance tax raid will devastate farms and family-run businesses, ministers have been warned
Farmers gathering at Whitehall for a demonstration against changes to inheritance tax announced in the Budget in October
He added: ‘Given a typical business will employ more people than an average farm, there’s a case to make that capping BPR may be even more damaging to the employment figures and the wider economy than capping APR.’
Some of Britain’s oldest businesses told how the changes, due to be introduced in April 2026, will affect them.
Lizzy Rudd, chairman of 326-year-old wine and spirits merchant Berry Bros & Rudd, said: ‘Inheritance Tax will threaten the future of the business and force us to think short-term to maximise returns to shareholders in order to build wealth outside the business to pay a future tax liability.’
William Lees-Jones, managing director of brewery JW Lees which was founded in 1828, said: ‘For us to have to divert funds into dividends to pay Inheritance Tax would be challenging and would inevitably reduce future investment in the company.
‘It would also place our business at a considerable disadvantage to our competitors who tend to be listed or owned by private equity, sometimes overseas.’
The impact on family businesses has been revealed as the Conservatives turn the heat up on Labour over the Inheritance Tax raid.
On Wednesday Tory leader Kemi Badenoch will use her first Opposition Day Debate to force a vote on what her party has dubbed the ‘family farm tax’.
New Tory leader Kemi Badenoch will use her first Opposition Day Debate on Wednesday to force a vote on what her party has dubbed the ‘family farm tax’
Tory environment spokesman Victoria Atkins said: ‘Labour’s vindictive Family Farm Tax threatens to destroy British farming as we know it.‘Labour MPs have a choice to make.
‘Will they vote to axe the tax, and save the family farm? Or will they turn their backs on rural communities and back the Budget of Broken Promises?’
Tomorrow, the Conservatives will also vote against Labour’s hike in employers’ National Insurance contributions as they reveal their position on Budget measures for the first time.
A Treasury spokesman 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 benefitting from over half a billion pounds in Business Property Relief 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.’
