Family-run businesses in the United Kingdom have expressed concerns that recent changes to inheritance tax policy are hindering investment and job creation, according to new polling conducted by Family Business UK. The survey indicates that one in four family businesses have either paused or abandoned investment projects over the past year, with more than half citing the impact of alterations to tax relief as a significant factor.

The polling, which surveyed a range of family-owned companies, found that about two-thirds of medium-sized firms are experiencing operational disruption and are planning to reduce investment and hiring as a consequence of the tax adjustments. Eleven percent of respondents indicated plans to downsize within the next year, attributing this to the increased financial pressures stemming from the revised inheritance tax rules.

Changes to inheritance tax relief were introduced during the 2024 Budget, led by the former chancellor Rachel Reeves. The revisions removed certain tax reliefs that previously allowed family business owners to pass assets to the next generation with reduced tax liabilities. This shift prompted backlash from various sectors, including farmers and small business owners, leading the government to raise the inheritance tax relief threshold to £2.5 million in an effort to mitigate the impact.

Neil Davy, chief executive of Family Business UK, emphasized the broader economic implications of the policy, stating that the current measures are restricting growth potential across the sector. “As the Autumn Budget approaches, the Chancellor has an opportunity to reverse the damaging measures introduced in the 2024 Budget by restoring full business property relief and agricultural property relief, the single most important step to unlock investment, job creation and growth,” he said.

William Cooper, director and co-owner of insurance broker William Russell, echoed these concerns, highlighting the difficulties his firm faced in adapting to the new regulations. He noted the significant time and financial resources spent on legal advice and restructuring efforts, which he believes diverted focus from core business activities. Cooper said the changes place family businesses, which collectively employ millions in the UK, at a structural disadvantage.

In response, a spokesperson for HM Treasury defended the revised tax relief measures, stating that the government has listened to stakeholders by raising the inheritance tax threshold to £2.5 million to provide protection for smaller family businesses. The spokesman added that the updated policies aim to ensure that the largest estates contribute fairly to public finances, enabling continued support for families and businesses across the country.