Family Businesses Urge Chancellor to Reconsider Inheritance Tax Changes

The owners of tens of thousands of family-run businesses and farms have called on Chancellor Rachel Reeves to reconsider inheritance tax changes announced in her recent Budget, warning that the measures could lead to forced sales, job losses, and reduced investment.

In an open letter sent over the weekend, Family Business UK—representing 32 trade associations and around 160,000 family enterprises—urged Reeves to consult more widely and carefully assess the long-term consequences of the proposed tax changes. The new policy, set to take effect in August 2026, will tighten inheritance tax relief. Family businesses passing on more than £1 million in assets will be subject to a 20 percent levy. The Office for Budget Responsibility estimates this measure will raise £520 million by 2029-30. However, Family Business UK argues that the policy could result in a £1.25 billion net fiscal loss due to reduced business activity and job cuts.

Neil Davy, the organisation’s chief executive, called the reforms a “hammer blow” to family businesses, which often form the backbone of local economies. He warned that many heirs may have no choice but to sell the business to cover the inheritance tax bill, risking the loss of valuable British assets and family farms to overseas buyers who would pay little to no tax in the UK.

The letter also highlighted concerns that some family business owners have already begun to freeze investment and recruitment, as employees fear the potential impact of the changes on their livelihoods. The uncertainty surrounding the policy has led to a slowdown in business activity, with many businesses postponing expansion plans or reducing staff numbers.

Family Business UK is urging the Chancellor to launch a formal consultation on the inheritance tax reforms, seeking a balanced solution that protects the interests of family enterprises, the jobs they provide, and the broader UK economy.

While the Labour government maintains that the inheritance tax changes are necessary to restore public finances after inheriting a significant funding gap, the letter’s signatories argue that tax reforms should not come at the expense of Britain’s family-owned businesses. They stress the importance of safeguarding these enterprises, which play a crucial role in sustaining local economies and employment across the country.