Business leaders are appealing to the new Chancellor, John Healey, to repeal inheritance tax measures enacted by his predecessor, Rachel Reeves, which they contend are detrimental to family-owned enterprises. In a letter addressed to Healey ahead of his inaugural budget, representatives from over 200,000 companies criticized the decision to apply death duties to businesses as the most damaging measure yet for private and family-owned firms.
These organizations warned that Reeves's changes are undermining investment, jobs, and the long-term viability of significant British companies, potentially making them vulnerable to foreign acquisition. The measures, announced in the 2024 Budget, initially targeted changes to Business Property Relief (BPR) and Agricultural Property Relief (APR), leading to concerns that family firms and farms could face substantial inheritance tax bills on assets exceeding £1 million from April 2026.
The policy change had previously ignited strong opposition, including protests by farmers in central London and warnings that over 200,000 jobs were at risk. In an adjustment prior to Christmas, the threshold was raised to £2.5 million, or £5 million for married couples, though this still leaves many businesses subject to inheritance tax.
Neil Davy, chief executive of Family Business UK, which coordinated the letter, stated that the Chancellor faces a choice: to persist with reforms that hinder family businesses' ability to invest and transition to the next generation, or to foster an environment that encourages economic growth. Davy emphasized that family firms are crucial employers and community anchors, and that taxing businesses at the point of succession could compel owners to divest assets, reduce investment or jobs, or sell the company.
He added that while the government had acknowledged the need for modification, thousands of ordinary businesses would still be impacted by the tax. "A family-owned business should not face a tax penalty simply because it has been built patiently and passed from one generation to the next," Davy said. He views the upcoming budget as an opportunity to improve the government's relationship with family businesses and signaled that reversing these changes would indicate Britain's commitment to retaining and growing businesses domestically.
Signatories, including UK Hospitality, the Country Land and Business Association, and Build UK, argued that Reeves's changes created a tax penalty for family ownership not equally applied to other business structures or foreign investors. This, they contended, forces difficult decisions upon business-owning families, such as finding cash for tax bills, cutting investment or jobs, or selling parts or all of the company.
Family businesses constitute over 90 percent of UK firms and employ 57 percent of the workforce, with a significant majority located outside London and the South-East, highlighting their importance for regional economic development. Gavin Lane, president of the Countryside Land and Business Association, urged Healey to fully reverse the changes, asserting that the increase in the threshold did little to ease the uncertainty that has affected businesses for two years.
Richard Smith, managing director of the Road Haulage Association, noted that family-owned businesses are vital to the road transport industry and its communities. He warned that changes to inheritance tax reliefs could divert capital from investment and succession planning, potentially leading to the breakup or sale of viable businesses. John Newcomb, chief executive of the Builders Merchants Federation, expressed concern that the measures could jeopardize the building materials supply chain, which is essential for the government's housing plans, by discouraging investment in manufacturing and supply companies.
Karen Dear, chief executive of the Craft Bakers Association, echoed these sentiments, stating that changes to inheritance tax reliefs risk penalizing family businesses for their long-term commitment, complicating succession and diverting investment from jobs and growth.