More than 200,000 jobs in family-run businesses and farms could be lost as a result of upcoming changes to inheritance tax rules, according to new research that warns of a substantial hit to investment, employment and long-term economic growth.
A nationwide survey of 4,200 family-owned firms and agricultural businesses — commissioned by lobby group Family Business UK and conducted by CBI Economics — found that the government’s decision to cap relief on business and agricultural property is already having significant consequences, with more expected from 2026 onwards.
From April next year, inheritance tax relief on qualifying business and agricultural assets will be capped at a combined £1 million per estate. Beyond this threshold, relief will fall from 100 per cent to 50 per cent. While individuals can still pass on £325,000 tax-free (rising to £1.5 million for couples passing on homes to direct descendants), the changes are expected to impact some of the UK’s most productive family businesses — especially in agriculture.
According to the research, over half (55 per cent) of family businesses have already cancelled or paused investment since the changes were announced in October 2023, and nearly a quarter have put recruitment on hold or cut jobs. If these trends continue, the sector could lose 208,000 jobs between 2026 and 2029, including 28,000 in farming alone.
The report warns this could wipe £14.4 billion from the economy over the current parliament, with investment down by an average of 19 per cent and headcount shrinking by 9 per cent across family firms. The government’s estimated £500 million per year windfall from the reform could be more than offset by lost tax revenue, with the survey predicting a net loss to the Exchequer of £1.9 billion over the same period.
“This research shows unequivocally that family businesses will respond by cutting jobs and investment, massively reducing tax revenue,” said Neil Davy, chief executive of Family Business UK. “The OBR must reassess its policy costings and the government should reconsider these damaging reforms.”
The Office for Budget Responsibility has already acknowledged that the revenue estimates are subject to “high uncertainty”, warning that behavioural changes such as increased gifting of assets or business sales could limit the policy’s effectiveness. The survey supports this: one in ten businesses said they are planning to sell to meet the tax obligations, and 9 per cent have already done so. Two-thirds have sought legal advice to mitigate the financial impact.
In 2021-22, over 1,800 estates claimed £550 million in business and agricultural property relief, with the largest farms accounting for nearly £220 million of that. Critics of the current system argue that the relief disproportionately benefits wealthier landowners — a claim the government cited in justifying the reform.
However, Davy contends the impact will be felt across the country. “It’s not too late for the government to revisit this policy. We’ve repeatedly asked to work constructively on a solution that raises necessary tax revenue while protecting jobs and reincentivising investment in Britain’s family business backbone.”
Family Business UK is calling for a full consultation with ministers ahead of implementation to explore more targeted reforms that balance the need for revenue with the imperative to support enterprise and regional growth. Without a shift in approach, Davy warns, the tax could do lasting damage to Britain’s “engine of local employment and economic resilience.”
