An organisation founded by Sir Andy Street, former John Lewis executive and current West Midlands mayor, has called on Chancellor John Healey to restore a key tax break for family-owned businesses and implement wider reforms to support small and medium-sized enterprises (SMEs) in the upcoming budget. The group, Prosper UK, which Street established alongside Baroness Davidson of Lundin Links, the former Scottish Conservative leader, outlined a series of proposals aimed at strengthening Britain’s entrepreneurial sector.

Prosper UK is urging the government to reverse recent changes to the inheritance tax relief known as business relief. Since April, a £2.5 million cap has been introduced on the value of business assets that can be passed on tax-free. Assets exceeding this threshold are now subject to an effective tax rate of 20 percent, a policy the organisation warns could compel families or founders to sell their companies prematurely, often to overseas buyers. Street emphasized the importance of retaining British businesses domestically, stating, “We are not short of entrepreneurs, but too many promising businesses are sold, often overseas, before they get the chance to become major British companies.”

In addition to restoring business relief, Prosper UK advocates for a fundamental overhaul of business rates. Currently applied to most commercial properties, these rates are described as outdated and potentially damaging to smaller enterprises. The group suggests replacing them with a land value tax, which they argue would better reflect property values and could provide a fairer system of commercial taxation.

Another significant proposal involves pension tax relief. Prosper UK recommends restructuring pension fund incentives to encourage greater investment in British start-ups and companies listed on the London Stock Exchange. Specifically, they propose making tax relief on new retirement contributions conditional on at least a quarter of the funds being directed toward domestic assets. This initiative aims to mobilize pension savings as a source of capital for UK businesses, potentially boosting economic growth and innovation.

Chancellor John Healey, speaking last week ahead of his first budget, expressed a commitment to supporting entrepreneurs, describing them as “bloody-minded” in their determination to succeed. While Healey has indicated an interest in fostering business growth, it remains unclear to what extent the government will adopt Prosper UK’s recommended measures.

The proposals from Prosper UK come amid ongoing debates about how best to balance taxation, business growth, and economic competitiveness. Advocates argue that tax relief and investment incentives are essential tools for nurturing homegrown companies and ensuring that Britain’s SMEs can thrive in a global marketplace. However, any changes to tax policy and rates will require careful consideration by policymakers, balancing the needs of businesses with broader fiscal and social objectives.