Chancellor of the Exchequer Rachel Reeves is under mounting pressure to abandon a recent change to inheritance tax rules that is causing alarm among family-owned businesses and farms across the United Kingdom.
The Controversial Threshold Shift
The Labour government, in a move announced just before Christmas, significantly altered the application of so-called 'death duties'. The threshold at which a 20 per cent inheritance tax rate applies to family businesses and agricultural holdings was raised from £1 million to £2.5 million. While this might initially appear to be a tax break, industry campaigners argue it will have devastating consequences, effectively making more family enterprises liable for the tax.
Paul Andrews, the founder and chief executive of the advocacy group Family Business United, has publicly called on the Chancellor to perform a complete reversal of the policy. In a piece for the Daily Mail, Andrews stated that the government should be doing everything in its power to support family firms, which he described as the "lifeblood of our communities and our economy." He accused Rachel Reeves of targeting them with an "ill-thought-out tax grab."
Warnings of Economic Fallout
The criticism centres on the potential long-term damage to the UK's economic fabric. Andrews warned that countless businesses embedded in communities nationwide could be "lost forever" due to the tax change. He emphasised their value extends far beyond job creation and tax contributions, highlighting their role in supporting local areas.
Steve Rigby, chairman of Family Business UK, echoed these concerns, stating the reforms could lead to "hundreds of thousands of job losses." He argued this is particularly damaging amid rising unemployment and difficulties for young people seeking work. Rigby also challenged the Treasury's financial logic behind the change.
A Perverse Outcome for the Treasury?
In a striking critique, Rigby suggested the policy may be financially self-defeating. While the Treasury forecasts an annual gain of a few hundred million pounds from the altered threshold, Rigby contends this is a modest sum in the context of public finances. The widespread job losses triggered by the change would result in lost income tax, National Insurance, and other revenues, potentially creating a net loss for the Treasury. "So the sums don't even add up," he concluded.
The campaign groups have united in their message: the policy threatens not only family-run enterprises and farms but also the economic stability of communities and could undermine the government's own fiscal goals. The ball is now in Chancellor Reeves's court to respond to these urgent calls for a policy rethink.
