Bosses warn of family firm firesale as inheritance tax crackdown kicks in
The government’s contentious inheritance tax crackdown on family firms will lead to the break-up of thousands of beloved British businesses and is already stifling investment, a group of influential bosses have warned.
The Treasury’s plans to end a decades-old carve out from death duty for family-run firms came into force on Monday, meaning offspring of a business owner will now face a 20 per cent tax bill on any stake in the business they inherit.
The clamp down, which was first announced at the government’s maiden Budget in 2024 alongside a similar reform to the farming industry, has triggered a years-long backlash, with business owners warning it will force their company to be broken up without complex tax planning.
“Most businesses will end up having to be sold,” drinks tycoon Steve Perez, the founder of VK-owner Global Brands, told City PM. “It hasn’t been properly thought through – nor have we been properly consulted with.”
Nick Showering, the founder of Showerings Cider, said: “I appreciate the government’s need to raise funds, but this tax interferes with the day to day operational decision-making of family businesses.
“If a tax liability of several million pounds arises after the death of a founder or shareholder the next generation will only have a few choices – borrow heavily, sell assets, or sell the business outright.”
The pair’s remarks echo earlier comments made by James Dyson, the billionaire entrepreneur who warned that his eponymous engineering firm would “stop being Dyson” unless the ministers abandon the plans. Rocco Forte Hotels founder Sir Rocco Forte has also said his luxury hospitality empire would need to be broken up to foot the tax bill were he to die suddenly.
Inheritance tax overhaul already killing off investment
The warnings come despite ministers watering down the original crackdown in January, raising the threshold at which inheritance tax kicked in from £1m to £2.5m.
But William Lees-Jones, managing director at JW Lees Brewery, said the higher thresholds will do little to prevent larger family firms from being forced to sell-off some or all of their business.
“I don’t want to sound sort of trite, but £2.5m doesn’t even buy you a decent pub,” he told City PM. “You sort of scratch your head and think, ‘Why would the government want to bring taxation in that basically disadvantages UK businesses against overseas ones.”
Despite only coming into force on Monday, the crackdown has already led some business owners to cancel planned investment decisions in a bid to keep a lid on the overall valuation of their firm.
Global Brands’ Perez said: “I’ve had to cut back investing in a new factory. I’ve had to pull investment in hotel and spa that already had planning permission, because all it will mean is my family will have a bigger tax bill.”
Perez has launched a legal challenge over the government’s decision to plough ahead with the inheritance tax overhaul without any consultation process.
Fiona Graham, chief operating officer of Family Business UK, said: “While we welcome the areas where the government has listened, the current measures still fall short of what is needed to protect jobs, investment and the confidence that enables family firms to plan for the future.
“Unless the government reconsiders, the country stands to lose valuable economic activity and long‑term stability. We remain ready to work constructively with ministers on a solution that restores confidence and supports the growth the UK urgently needs.”