Organisations representing more than 200,000 businesses have urged Chancellor John Healey to reconsider reforms to Business Property Relief (BPR) ahead of next month’s autumn Budget.
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The changes, introduced by his predecessor Rachel Reeves at the 2024 autumn Budget, took effect in April and restricted BPR and Agricultural Property Relief to a £2.5m allowance per estate.
Unused allowance can be transferred between spouses and civil partners, while qualifying assets above the allowance receive 50% tax relief.
Organisations have now called for 100% BPR to be restored for qualifying family businesses, arguing it would provide greater certainty for leaders when planning investment and succession.
They warned the current rules could leave families with an inheritance tax bill when they pass their business to the next generation, without having enough cash available to pay it.
Opportunity to reset
Families could then be forced to cut investment or jobs, sell part of the business or, in some cases, the entire company to raise the money.
The campaign is being led by Family Business UK, a not-for-profit organisation representing and supporting family-run companies.
Its research found the changes to BPR and Agricultural Property Relief could put 208,500 jobs at risk, reduce UK economic activity by £14.86bn and result in a £1.87bn net fiscal loss to the Government by the end of the current Parliament.
In addition, the data noted family businesses make up more than 90% of firms in the UK economy and employ 57% of the total workforce.
Almost four in five family businesses surveyed were based outside London and the South East, making them particularly important to the Government’s ambitions for regional growth and regeneration.
Signatories to the open letter include UKHospitality (UKH) chair Kate Nicholls OBE.
Family Business UK CEO Neil Davy said the Budget presented the Chancellor with an “opportunity to reset” the relationship between Government and family businesses.
Tax penalty
“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,” Davy said.
“Reversing these changes would send a powerful message that Britain wants businesses to stay here, invest here and grow here - not become forced-sale opportunities for overseas buyers.”
Davy added: “Family firms are employers, investors and anchors in communities across the country.
“When you put a tax charge on the business itself at the point of succession, you risk forcing owners to do the very thing the Government says it wants to avoid - sell assets, cut investment and jobs or put the future of the business in someone else’s hands.
“The Government has already recognised 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.”
