Business groups representing more than 200,000 British firms have urged Chancellor John Healey to reverse recent inheritance tax reforms introduced by his predecessor, Rachel Reeves. In a letter sent ahead of Healey’s first Budget on October 28, organizations representing sectors from retail to hospitality and construction warned that the changes are already undermining investment, jobs, and the long-term sustainability of many family-owned companies.
The reforms, announced in the 2024 Budget, involved capping Business Property Relief (BPR), a tax relief that had allowed family businesses to pass assets from one generation to the next without facing inheritance tax. Previously, BPR effectively shielded a business’s value from inheritance tax indefinitely. Under the new rules, from April 2026, relief applies only to the first £2.5 million of a business's value, with amounts above that taxed at a 20% rate following the death of an owner. Married couples can claim relief on up to £5 million.
Family Business UK, which coordinated the letter, described the reforms as “the most damaging measure yet for private and family-owned firms.” The group, along with signatories such as UKHospitality, Build UK, and the British Independent Retailers Association, argued that many businesses cannot absorb the tax burden without cutting jobs, reducing investment, or selling their enterprises. Family firms constitute approximately 90% of UK companies and employ about 57% of the workforce, with a significant portion located outside London and the southeast.
Neil Davy, chief executive of Family Business UK, emphasized the risk that the tax changes could force business owners to act contrary to government goals by selling assets or relinquishing control to third parties. “The chancellor has a choice: 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,” he said.
The reforms elicited strong opposition from farming groups and family businesses. Farmers staged protests, including a tractor convoy in central London, warning that the new inheritance tax liabilities could threaten the future of many agricultural enterprises. Although Rachel Reeves raised the tax threshold from £1 million to £2.5 million shortly before Christmas 2025, critics maintain that the burden remains significant.
Some business leaders also expressed concerns that these tax changes, combined with other recent adjustments such as those affecting non-domiciled status, capital gains tax, and exit taxes, may incentivize wealthy families to relocate abroad. Steve Rigby, chief executive of the Rigby Group, told media outlets that the combination of such measures is prompting some families to leave the UK to avoid higher taxation.
As Chancellor Healey prepares to deliver his first Budget, the letter’s authors called on him to restore the previous inheritance tax framework introduced in the 1970s, arguing that such a reversal would safeguard jobs, encourage investment, and preserve the long-term viability of Britain’s family-owned businesses. The government has yet to respond to the appeal, with commentators anticipating that the Budget will signal its stance on this contentious issue.