How family businesses could be bankrupted by Labour's inheritance tax plan

A huge tax bill upon the death of a founder would leave many family businesses with no option but to sell assets, lay off staff – or shut down entirely

This country’s prosperity depends on the strength and success of our businesses – across every sector, every region, and every size. Whether it’s a family-run shop on the high street or a multinational exporting goods across the globe, the health of our economy is directly tied to the ability of businesses to grow, invest, and create good jobs.

Economic growth is the engine that funds everything we value – from the NHS to national defence, from welfare to public infrastructure. Labour’s failure to recognise this fundamental truth is forcing painful trade-offs and short-sighted decisions.

Labour won’t escape the current economic stagnation by taxing ambition and penalising entrepreneurship. They must create conditions where businesses feel confident to expand, to innovate, and to hire. Yet, from the perspective of many business owners – especially those who’ve built something from the ground up – there’s little to celebrate.

Leading Conservative politicians, including Kemi Badenoch, with farmers as they protest about changes to inheritance tax. Family business owners may also join their ranks (Picture: Dan Kitwood) | Getty Images

Business property relief

Despite promising support in the run-up to the last election, this government has burdened businesses with more red tape, higher employment costs, and, most damagingly, a quiet war on family enterprises. The proposed changes to inheritance tax – and specifically business property relief (BPR) – could cause irreparable damage to the UK’s economic fabric.

As it stands today, shares in a family business can be passed down to the next generation without incurring inheritance tax. BPR has enabled families to plan for the future, reinvest profits, and create intergenerational stability.

But now, Chancellor Rachel Reeves is threatening to dismantle this principle. The proposed reforms could result in tax bills running into the millions – money family businesses simply don’t have lying around.

Faced with a huge and sudden tax bill upon the death of a founder, many family businesses would have no option but to sell assets, lay off staff – or shut down entirely. That’s not economic strategy, that’s economic vandalism.

Worse still, the government made no mention of these plans before the election. Businesses have been blindsided, with no time to adapt or plan. For many, the damage is already being done; hiring freezes, investment put on hold, expansion plans shelved. The uncertainty is corrosive – and entirely avoidable.

Labour showing its true colours

Businesses feel like they are being punished by Labour. A recent survey revealed fewer than a third of businesses expected to increase profit over the next year and 60 per cent believed recent US tariffs would hurt the Scottish economy.

With the Scottish parliamentary elections just around the corner, businesses will be looking to the party they feel has their best interests at heart, and currently Labour are showing their true colours. This government insists it values growth, champions enterprise, and supports business. But look at its actions: stealth taxes, broken promises, and ill-conceived reforms.

It’s not too late to change course. There is still time for this government to listen, to engage with the very businesses that form the backbone of our economy, and to reverse course on these damaging proposals.

Family businesses are not asking for special treatment. They are asking for recognition of the vital role they play, and the unique challenges they face. If we want to build a stronger, fairer, and more resilient economy, we must stop punishing those who are trying to do just that.

John Lamont is MP for Berwickshire, Roxburgh and Selkirk