Save our family firms: Rachel Reeves blasted over 'shocking' inheritance tax raid on business that will do 'profound damage' to economy
Farmers and family business owners have joined forces in a last-ditch bid to overturn an inheritance tax raid that threatens to destroy livelihoods as generations of hard work are laid to waste.Campaigners have launched legal action against the Chancellor and HM Revenue & Customs over proposed changes that will land them with punishing death duties.Lawyers in the case called on the court to make a decision quickly – warning 'time is running out' with the levy due to be introduced next year.Under reforms announced by Rachel Reeves in last year's Budget, farms and family firms worth over £1million will have to pay inheritance tax of 20 per cent from April 2026.The move has triggered outrage among farmers, who yesterday staged another go-slow tractor protest, with clogging up major routes up and down the country.Family firms are now also making their voices heard amid fears they will be sold or broken up in order to cover the tax bill. Rachel Reeves has launched an inheritance tax raid on farms and family businesses Writing in the Daily Mail, hotelier Sir Rocoo Forte said: 'You would think a government that declares economic growth to be its number one priority would be doing all it can to support family firms.'Not a bit of it. Chancellor Rachel Reeves has instead announced a shocking tax grab targeting these companies.'He added: 'The Government's plans risk dismantling decades of stability for businesses across the country, and harming jobs and growth.'We're talking about the loss of livelihoods, proud family legacies and profound damage to the regional economies that depend on them.'Under the old regime, family businesses and farms could be passed down when the owner dies without any inheritance tax.But reforms to so-called 'business property relief' (BPR) and 'agricultural property relief' (APR) mean that from April 2026 any assets worth over £1million will be hit with death duties of 20 per cent.The Treasury claims the changes – dubbed the 'family farm tax' and 'family firm tax' – will raise around £520million a year.But research by lobby group Family Business UK (FBUK) shows it will cost more than it raises as more than 200,000 jobs are lost and firms slam the brakes on investment to save money to cover the looming tax bill. Sir Rocco Forte warns the tax raid will harm jobs and growthCampaigners have applied to the High Court for a Judicial Review into the proposals – citing the Government's failure to consult on the changes.'The claimants say that the Chancellor's decision failed to comply with her public law duties,' say papers lodged at the High Court.James Austen, a partner at City law firm Collyer Bristow, which launched the legal claim, said: 'Farmers have been effective at branding these changes the 'Family Farm Tax', and for good reason, but it's not just farmers who will be affected by them. In overall economic terms, family-owned businesses will take the bigger hit. 'This Judicial Review claim brings farmers, entrepreneurs and business owners together to seek a proper consultation exercise on a policy that they say will damage the UK economy and cost far more than it generates in tax.'And he called on the court to make a decision quickly.'We are pressing the court to make a decision,' said Mr Austen. 'The delay is affecting the claimants' right to an effective remedy. Time is running out and they need a decision.'Neil Davy, chief executive of FBUK, accused ministers of refusing to 'engage in meaningful consultation' with businesses in the firing line despite the damage the policy is set to cause.'You do not have to look far to find evidence of what the Budget choices of the Government have achieved,' he said.'Businesses have lost confidence. They are sitting on their hands. Growth is weak and the jobs market is the worst we have seen for years.'He added: 'For a government elected on a promise of delivering growth you have to wonder why it has chosen to pursue a policy that actively undermines that ambition and the businesses that will deliver it?'Nafeesa Hussain, at WSP Solicitors, said: 'Family business owners are increasingly asking themselves: 'What is the point of working tirelessly to build a business if there's nothing left to pass on?''These are businesses built over decades. The changes in inheritance tax are putting the future of thousands at risk.'This tax grab will lead to the loss of livelihoods and proud family legacies - and MUST be stoppedBy Sir Rocco Forte, chairman of Rocco Forte HotelsHospitality is in my blood. It all started with my grandfather, who came from a little village up in the hills in Italy to Scotland in 1911 to open an ice cream parlour.Since then, the Forte family has lived and breathed hospitality — my sister Olga and my three children Lydia, Irene and Charles all work today in my business.Being a family firm is what defines us. It's our name above the door so we care deeply about the service our guests are provided with in our hotels.Our employees are part of our extended family and our establishments are cornerstones of their local communities.Family firms like ours make up a startling 90 per cent of all businesses in the UK, and employ well over half of the entire workforce.It is estimated that they paid £422 billion in tax in 2023 – and contributed £985 billion in Gross Value Added (GVA) – nearly two-thirds of the entire contribution from the private sector.So you would think a Government that declares economic growth to be its number one priority would be doing all it can to support family firms.Not a bit of it. Chancellor Rachel Reeves has instead announced a shocking tax grab targeting these companies. In doing so, she is unpicking the work of her Labour predecessor Denis Healey, who introduced business property relief in 1976. Then, Labour wanted to recognise the special position of family companies in the economy and allow one generation to pass a successful company on safely to the next.Under Ms Reeves' proposals, inheritance tax on any assets worth over £1million will increase from zero to 20 per cent from April 2026.We've heard a lot about the impact on family farms, but less about the bigger hit to family firms.Many ordinary medium-sized and large family businesses will be dragged into the tax next as a result. That will mean that the next generation of family businesspeople is hit with huge, unaffordable tax bills - in many cases running into the millions of pounds.The only option for many will be to cut costs however they can, break up their firms or sell them altogether. These companies will be easy pickings for private equity or foreign owners operating in the UK — who won't be subject to UK inheritance tax. Other companies will have to borrow money and take on a lot of debt to create dividends, themselves taxable at 40 per cent, to pay up - restricting their growth and future prospects.The Treasury insists this change will raise £500million. But Family Business UK is forecasting it will mean 208,000 job losses — which will result in an overall hit of £1.9billion to the public finances.The Government's plans risk dismantling decades of stability for businesses across the country, and harming jobs and growth.We're talking about the loss of livelihoods, proud family legacies and profound damage to the regional economies that depend on them.It's not too late for the Government to change course.All the family business sector is asking for is a proper review of the impact of these proposed changes. We are confident it will show that the sums simply don't add up.If ministers are serious about growth, then they cannot afford to undermine the very businesses that anchor our communities, train our young people and reinvest their profits back into Britain.Family firms are not faceless corporations run by fat cats; they are rooted in place, shaped by generations of care and commitment, and driven by the desire to build something lasting. Strip them of the ability to plan for the future - to pass on their life's work without punitive penalties - and you will rip out one of the quiet engines of national prosperity.DIY INVESTING PLATFORMSAJ BellAJ BellEasy investing and ready-made portfoliosHargreaves LansdownHargreaves LansdownFree fund dealing and investment ideasinteractive investorinteractive investorFlat-fee investing from £4.99 per monthFreetradeFreetradeInvesting Isa now free on basic planTrading 212Trading 212Free share dealing and no account feeAffiliate links: If you take out a product This is Money may earn a commission. These deals are chosen by our editorial team, as we think they are worth highlighting. This does not affect our editorial independence.Compare the best investing account for you
