UK’s Inheritance Tax Policy Worries Farmers and Construction leaders
The UK government’s recent inheritance tax reforms have sparked alarm among two critical sectors: agriculture and construction. At the heart of the issue are changes to Agricultural Property Relief (APR) and Business Property Relief (BPR), which have historically allowed family-run operations to transition assets without crippling financial burdens.
These reforms threaten the sustainability of generational farms and construction firms and pose risks to the broader economy. Leaders from both industries are united in their opposition, warning of potential closures, downsizing, and significant disruptions to rural and urban communities.
Understanding the inheritance tax reforms
The government’s decision to amend inheritance tax laws, particularly around APR and BPR, has triggered widespread concern. Under the new rules, agricultural and business assets exceeding £1 million will face a 20% inheritance tax beginning in April 2026.
While officials argue the changes ensure wealthier estates contribute to public finances, critics say the threshold is too low, putting small family-owned enterprises at risk. APR and BPR have long allowed family businesses to transfer assets with minimal tax burdens, providing a lifeline for enterprises with low liquidity.
The agricultural sector’s fight to preserve family farms
For UK farmers, the inheritance tax reforms directly threaten the survival of family farms. The National Farmers’ Union (NFU) estimates that nearly 75% of commercial farms exceed the £1 million threshold, forcing many families to consider selling land or equipment to cover the tax. Such measures could reduce farm productivity and harm rural employment.
NFU President Tom Bradshaw has voiced concerns about the human impact, especially for older farmers unable to meet the seven-year gifting requirement for tax-free transfers. Recent protests in London, where thousands of farmers gathered outside Parliament, underscored the frustration. Farmers argue that the reforms disregard the agricultural sector’s importance to the UK economy and rural communities.
The construction industry’s shared struggles
Construction businesses are grappling with similar challenges under the inheritance tax changes. Like farms, construction firms often rely on generational ownership and operate on tight profit margins. The National Federation of Builders (NFB) has expressed solidarity with farmers, highlighting the comparable risks faced by the construction sector.
Richard Beresford, the NFB’s chief executive, noted that the changes could force businesses to restructure, downsize, or close altogether, resulting in job losses and a reliance on subcontracting. This shift could weaken direct employment and place additional pressure on public services and pensions. The Builders Merchants Federation (BMF) added that many small firms could struggle to maintain their assets under the revised business property relief rules, further destabilizing the industry.
Broader economic implications of the tax reforms
Beyond individual businesses, the inheritance tax reforms risk harming the UK economy at large. Critics argue that the changes stifle entrepreneurship and place an unfair burden on family-run enterprises, which play an essential role in economic stability.
Entrepreneurs like Sir James Dyson have criticized the policy for favoring foreign investors over domestic businesses. Similarly, Edward Stanley, Earl of Derby, warned that historic estates combining agriculture and tourism could face insolvency, leading to widespread job losses and diminished rural heritage.
The reforms’ cumulative effects could erode the economic contributions of generational businesses. These enterprises support local employment and supply chains, fostering stability in both urban and rural communities. Their decline would weaken the social and economic fabric of the nation.
Potential solutions and industry calls for action
In response to these challenges, industry groups have proposed amendments to the tax reforms. The NFU suggests raising APR and BPR thresholds to align with modern asset valuations. Additionally, they advocate for exemptions for family businesses, allowing them to transition assets without excessive tax penalties.
The construction sector is urging the government to clarify eligibility for reliefs, ensuring that firms vital to employment and infrastructure are protected. Joint efforts between the NFB and BMF aim to push for more equitable policies that account for the unique challenges facing these industries.
Both sectors are calling for the government to reconsider the reforms. The alliance between agriculture and construction highlights the shared stakes in safeguarding generational businesses, not only for their survival but for the broader health of the UK economy.
The inheritance tax reforms have united agriculture and construction in a shared fight to protect generational enterprises. With the looming threat of asset sales, downsizing, or closure, the urgency for policy adjustments has never been greater. Protecting generational businesses is a critical step toward securing the country’s economic future.
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