A damning new report lays bare how the government’s Inheritance Tax changes will clobber family-owned businesses as well as farms.
Keir Starmer (Image: Getty)
Labour’s budget raid on family firms will put more than 125,000 jobs at risk and cost the economy £10 billion.
A damning new report lays bare how the government’s Inheritance Tax changes will clobber family-owned businesses as well as farms.
Capping Business Property Relief (BPR) at £1million will punish smaller businesses, put thousands of jobs at risk and stifle economic output, it says.
The stark warning is the latest humiliating blow for Keir Starmer in his first five months as Prime Minister.
Sir Keir will attempt to reset his stumbling premiership in a speech today following the widespread anger at Labour’s tax plans and his “freebies” row.
Rachel Reeves (Image: Getty)
Rachel Reeves at last week’s CBI conference (Image: Getty)
His first months in No10 have also seen the PM forced to sack Sue Gray as his chief of staff amid Downing Street infighting.
And Sir Keir suffered a further blow in recent days with the resignation of Louise Haigh as transport secretary when it emerged she had a criminal conviction.
Heaping further pressure on the Labour leader, the CBI economics report warns, during the term of this Parliament, the decision to cap BPR could lead to at least 125,000 jobs losses and reduce the value of goods and services produced across the economy by £9.4billion.
Taken together, these reductions could result in £1.3 billion loss to the Treasury between 2026/27 and 2029/30.
This is significantly lower than the £1.4bn gain in revenues estimated by the Office for Budget Responsibility (OBR) during the same period from the policy change to BPR alone.
The analysis, part of which involved a survey of 234 family businesses, finds that more than a fifth of family businesses (27%) with assets valued at more than £1million expect to transfer the ownership of their business between 2026/27 and 2029/30 in a way that would incur Inheritance Tax.
This is expected to lead to nearly 5,000 businesses making adjustments that have an impact on their activity.
Most family business owners say they will be forced to downsize, cut investment or reduce headcount.
Chancellor Rachel Reeves unveiled reforms at last month’s budget limiting the existing 100% Agricultural Property Relief (APR) relief for farms to only the first £1 million of combined agricultural and business property.
But the measure has sparked widespread fury from farmers who are demanding a U-turn.
Neil Davy, CEO of Family Business UK, said: “Just as we’ve seen among the farming community in relation to APR, changes to BPR announced in the budget will fundamentally remove incentives among owners of family firms to invest in their businesses, and in many cases threaten their viability.
“Downsizing of businesses, asset disposures, complete sale or liquidation are very real unintended consequences of this policy.”
“Given a typical business will employ more people than an average farm, there’s a case to make that capping BPR may be even more damaging to the employment figures and the wider economy than capping APR. “
William Lees-Jones, Managing Director of JW Lees said: “The proposed changes will be a real blow to companies like JW Lees.
“We would urge the government to consult with businesses to look at all the potential unintended consequences of these proposed changes.”
Speaking ahead of the report’s release shadow environment secretary Victoria Atkins told Times Radio that family firms are facing an “existential threat”.
“The impact on family businesses up and down the country, particularly in the Midlands and the North where we tend to have smaller businesses, often passed down generations, this is an existential threat for them as well,” she said.
Sir Keir will launch an unprecedented reset of his government this week amid continued unrest from backbenchers.
In another speech on Thursday the Prime Minister will pledge to achieve “ambitious but achievable” targets as he attempts to put his turbulent start in Number 10 behind him
He will ask voters to judge him on “milestones” such as improving the NHS and growing the economy, in a bid to draw a line under rows such as the winter fuel payment cuts.
But Nigel Huddleston, Co-Chairman of the Conservative Party, mocked the Labour leader’s
“Keir Starmer’s 17th relaunch will do nothing to hide the chaos Labour have unleashed on the country,” he said.
“In four short months his Labour government has been engulfed in a cronyism row, cut the Winter Fuel Payment for 10 million pensioners, hit farmers with the Family Farm Tax and hammered businesses and working people with higher taxes. While Keir Starmer has serious questions to answer about why he let someone serve in his Cabinet who he knew had a fraud conviction.
“The British people will rightly be wondering why they have been short changed by the Party that claimed to offer change.”
Cabinet minister Pat McFadden rejected the suggestion that Sir Keir’s plan for change is a reset.
He told the BBC: “No. We’ve been working on this since the early days of government.”
“We knew that government would always have events that buffet you around from week to week and things that would cause a lot of heat in the newspapers, you have to deal with those.
“But alongside those you have to look at the long-term too.”
Most Popular Comments