Family Business UK has warned Labour against ripping up rules that allow family businesses to be passed on to the next generation without being hit with inheritance tax
Labour has been cautioned against altering regulations that currently allow family businesses to be passed down generations without incurring inheritance tax. At present, business relief enables family firms to transition from one generation to the next with either a full or 50% reduction on the often-dreaded "death tax", typically levied at a rate of 40%.
Businesses consulted by FBUK expressed fears that "any policy decision that restricts the reliefs would likely result in family businesses being broken up, offshoring, or - in the worst-case scenario - closing". Sir Keir Starmer's government has prioritised increasing private sector investment as part of its strategy to stimulate economic growth.
The Institute for Fiscal Studies has previously noted that limiting the business relief from inheritance tax at £500,000 would amass £1.1bn a year for the public coffers. Abolishing it would rake in £1.4bn, should businesses not alter their behaviour, according to estimates by the think-tank. Around 3,200 estates incur benefits from business relief each year, thus avoiding an average tax invoice of £770,000 in each instance, as per FBUK's analysis of data from HM Revenue & Customs. Approximately 13.9 million jobs - almost half of all UK private-sector employment - are accounted for by family-run businesses, FBUK estimates suggests.
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