Family business group warns changes to inheritance tax for agriculture businesses will have ‘chilling effect’ on UK economy

Upcoming reforms which could increase inheritance tax for many farmers and landowners risk “undermining Britain’s family business sector”, the government has been warned.

In its 2024 Autumn Budget, the government announced that business property relief (BPR) and agricultural property relief (APR), which provide relief from inheritance tax (IHT), will only apply to the first £1 million of qualifying assets from 6 April 2026.

For anything over that, only 50% relief will be available, which effectively introduces a 20% tax on certain assets where previously none existed.

In evidence submitted to the House of Lords Finance Bill Sub-Committee, Family Business UK (FBUK) warned that the policy reforms are a threat to many family-run businesses.

It said the changes risk “having a chilling effect on the UK economy” and result in the loss of 208,000 full-time jobs, almost £15 billion reduction in GVA and a net fiscal loss to government of almost £2bn in this Parliament.

It also said the six-month window for reporting and paying IHT is “unrealistic for family businesses committed to long-term investments” which will “create a liquidity crisis among family firms”, while “the timetable for implementing the reforms is too aggressive and lacks the necessary transitional provisions to protect family businesses”.

Matt Jaffa, policy and public affairs director at FBUK, said:

“We have grave concerns about the changes to this pivotal policy for family businesses, and the speed with which the government plans to implement them.

“Family business often need years, not months, to rearrange their affairs. Implementing these policy changes in April 2026 creates a cliff-edge for family-owned firms and has enormous implications for the decisions they are being forced to take.

“Outside of a technical consultation on Trusts, the wider reforms to BPR and APR were announced without any meaningful engagement with family business owners leading to widespread confusion, anxiety and mistrust.

“A transparent and inclusive consultation process is now essential to ensure that tax policy supports – not undermines – the long-term success of family businesses. So, we are calling on the chancellor to meet with us, our members and stakeholders and co-design a policy that balances fiscal responsibility with economic sustainability.”