Family businesses still face punishing inheritance tax bills after the Chancellor made only ‘minor tweaks’ following a furious backlash over her plans.
In last year’s Budget, Rachel Reeves said family firms and farms worth more than £1million would be hit with death duties of 20 per cent from April 2026.
That outraged farmers and businesses amid fears it would end to family ownership of many long-established enterprises.
The Chancellor yesterday watered down her original plan by allowing the £1million tax-free allowance to be transferable between spouses and civil partners – meaning a combined allowance of £2million for married couples.
But the move was dismissed as a ‘very slight concession’ that would still leave family firms and farms facing huge bills when the owner dies.
The Budget also fixed the £1m figure until April 2031 – meaning fewer beneficiaries as time goes on due to inflation and increases in property values.
Rachel Reeves is allowing business owners to combine spouses’ £1m inheritance allowance
Neil Davy, chief executive of campaign group Family Business UK, said: ‘The Chancellor’s announcement allowing family business owners to transfer their £1million allowance between spouses is a welcome step and one of the proposals we asked the Government to consider.
‘But it represents a minor tweak to a policy that is doing enormous damage to private and family-owned businesses and farms.’
Mr Davy added: ‘The changes to BPR and APR have led business owners to cut investment and stop hiring.
‘(The) announcement is recognition that the Government got this policy wrong last year. Minor tweaks do not make it right.
‘The right thing for government is to pause this policy and work with us to find a better solution than this damaging tax.’
Nick Showering, of cider manufacturer Showerings, the owner of Babycham, which was set up as a family business 183 years ago, called the spousal allowance ‘a very slight concession which doesn’t go nearly far enough’.
Nick Showering, of Showerings, said family firms are ‘the backbone of the economy’
Warning the inheritance tax policy could see family-run firms sold up, he said: ‘Family businesses like ours make up the backbone of the economy and employ generations of people.
‘This tiny little concession isn’t going to make nearly enough of a difference to the negative impact of this policy.
‘What the changes mean is the shareholdings in these businesses are going to have to be sold up and subsequently that means they won’t stay as family businesses – and the support we give to the local community won’t continue.’
Meanwhile, Paul Milsom, of Milsom Hotels, which runs five boutique hotels and restaurants in Essex and Suffolk, said the small concession was a ‘blow compared to what people were hoping was going to happen’.
Paul Milsom, of Milson Hotels, accused the government of attacking family businesses
He said: ‘This government is incredibly short-sighted in attacking family businesses.
‘They should be encouraging long-term decision-making and the involvement of families. Their attack, which started last year, is very challenging for everybody’.
Keith Knowles, executive chairman of family-run Beds and Bars, which owns pubs, bars and hostels including the Belushi’s and St Christopher’s Inns brands, said: ‘This business was founded by my father in 1964.
All three of my children work in the business and it’s worth between £50million and £100million. We won’t get any benefit from a tiny allowance change.’
He added: ‘There has been no proper evaluation of what would be a fair figure for relief. My suspicion is they’ve just picked £1million because it sounds like a lot of money.
‘This is a government, like the previous government, that doesn’t have any competence. It has simply made this country un-investable.
‘If they encouraged investment, we would see growth, but they just tax and tax and tax.
‘I’m selling my assets in the UK. This government lacks ambition and lacks intelligence. You do not grow an economy by taking people to death.’
William Lees Jones, of JW Lees brewers, which has a turnover of £100million and employs 1,600 people at its Greater Manchester brewery and 138 pubs, said of the allowance change: ‘It’s really disappointing and I think it should be treated with the contempt it deserves.
Williams Lees Jones said Reeves’ offer ‘should be treated with the contempt it deserves’
Mr Lees, whose firm was visited by the then Prince Charles to mark its 175th anniversary in 2003, ‘I find this £1million figure quite worrying.
‘£1million doesn’t buy one pub. Top of the agenda for a business like ours is always succession.
‘It’s almost as though the government is going to force businesses to be sold because there’s nothing in it for the next generation.
‘Businesses like ours are being disadvantaged compared to overseas companies operating in the UK.
‘We might as well go and set up our business in the Cayman Islands or Monaco and trade in the UK.’
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