Farmers are fighting back against Labour’s tax hikes – other businesses must do the same

15 February 2025, 10:20 | Updated: 15 February 2025, 10:30

Farmers have been vocal about Labour’s planned Inheritance Tax (IHT) changes, and they’re right to be concerned. But they’re not the only ones who should be.

Thousands of family-run businesses across the UK face the same financial threat, yet their struggles have barely been acknowledged.

Much of the debate has focused on agricultural businesses, even though farming makes up less than 5% of the UK’s family-run enterprises. Meanwhile, countless manufacturers, retailers, logistics firms, care providers and others - who represent the vast majority - are being overlooked, even though they will be just as affected.

Currently, Business Property Relief (BPR) and Agricultural Property Relief (APR) protect many family businesses from IHT. But from April 2026, these will be capped at a combined £1 million lifetime limit. Any value beyond this will be taxed at 20%. While that may sound like a high threshold, in reality, many small and medium-sized businesses will be caught in the net.

Take a hypothetical small manufacturing firm that has been passed down for generations. After years of reinvestment, it owns its premises, now valued at £2 million. If the owner were to pass away, their heirs could face a £200,000 tax bill, money they likely don’t have. The only way to pay? Selling the factory, putting jobs at risk.

For businesses operating through limited companies, the situation is even worse. Extracting cash to pay the IHT bill could trigger additional tax liabilities of up to 39.1%, meaning nearly double the cash is required just to cover the tax. Labour insists only 2,000 estates will be affected, but given HMRC’s slow and outdated processes, this figure is almost certainly an underestimate.

This isn’t just about inheritance - Labour’s wider tax policies, including National Insurance hikes, are making it harder for businesses to grow, hire, and invest. If the government truly wants to support the economy, it must rethink its approach. Raising the IHT relief cap to £5 million would be a more realistic threshold, protecting smaller businesses from financial distress. It should also consider allowing businesses to pay IHT directly on their assets rather than forcing heirs to extract dividends first, which results in double taxation.

Farmers have shown that when an industry pushes back, it gets heard. Now, other family businesses must do the same - by petitioning, lobbying, and keeping this issue in the public eye.

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Lucy Williams is managing partner at business advisory and accountancy firm JS

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