Industry bosses have warned Chancellor John Healey that he must reverse Rachel Reeves's inheritance tax reforms or risk fewer British businesses being passed on to the next generation. Organisations representing more than 200,000 businesses cautioned that his predecessor's decisions could force local companies into the hands of overseas buyers.
Open letter to the Chancellor
Family Business UK, UKHospitality, the Country Land and Business Association and the Craft Bakers Association are among the groups warning in an open letter to Mr Healey that jobs and investment have already taken a hit.
Neil Davy, chief executive of Family Business UK, said: "The Chancellor has a choice in his first Budget: make it harder for British family businesses to invest, employ and pass their businesses on to the next generation by sticking with his predecessor's reforms, or give them the confidence to get on with building the economy."
He added: "The Government has already recognised that the original policy needed to be softened, but thousands of ordinary businesses will still be dragged into the death tax net. 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."
Impact of the reforms
In the 2024 autumn Budget, Ms Reeves announced 100% relief for combined agricultural and business property was initially set to be restricted to £1million per individual, dropping to a 50% relief rate thereafter from April 2026. Following an outcry and intense campaigning by the Daily Express, the allowance was increased to £2.5million per estate, with unused allowance transferable between spouses and civil partners.
Family Business UK believes that the changes still leave many successful, long-established medium and larger-sized businesses facing a huge inheritance tax bill, which could force firms to reduce investment or jobs, sell part of the business or even sell the entire company.
Gavin Lane, Countryside Land and Business Association (CLA) president, said: "The new Chancellor has a golden opportunity to reset the Government’s relationship with rural and family businesses by fully reversing the inheritance tax changes at his first Budget.
"He should use this Budget to draw a line under the uncertainty that has gripped businesses for the last two years, which the increase in the threshold did little to alleviate. The CLA has continued to ask for a full reversal of this policy to send a clear signal that the Government is listening – and is backing them to invest and grow in long-term critical infrastructure for their businesses and the wider economy."
Political response
The Tories are likely to announce that they will abolish inheritance tax if Kemi Badenoch becomes Prime Minister. Andrew Griffith, Shadow Chancellor, said: "This tax raid was a mistake when Rachel Reeves announced it, and it remains one now.
"Family firms and family farms are the backbone of this country and are often the biggest employers in many towns. John Healey has a chance to put this right by adopting the Conservatives' plans at the Budget and ditching these vindictive tax rises. Doing so would send a message to family businesses that Britain is a country where you can build a better future for your children."
The Treasury has been contacted for comment.
