'We face a £6m inheritance tax bill under Reeves's changes – it's sheer terror'

Five years ago, Emily Wright, 25, didn’t think she’d be caught in a fight to save the family business, now at risk of being sold off to pay an estimated £6 million inheritance tax bill she has no other way of paying.

With an economics degree from Royal Holloway University she was set for a career in the City, managing other people’s money. But when Covid hit she joined the family firm instead. Now new inheritance tax (IHT) rules mean it’s her own finances she has to worry about.

Plus those of her brother, sister, 63-year-old father, and 60 other workers at Storefield – the Northamptonshire recycling business her dad built 30 years ago, out of the haulage firm her steelworker grandfather set up in 1960 – which is now at risk of being broken up to pay death duties.

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“The sheer terror this policy has caused me is indescribable,” Wright said, speaking exclusively to MoneyWeek about the rule changes forcing a multi-million pound IHT bill on her and her siblings.

“With 40 lorries in the yard it is easy to quantify the taxman taking 10 of them. It’s a sickening thought. Ten jobs lost for no reason other than my own decision to work in the family business.”

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How are inheritance tax rules changing?

Wright’s family is among tens of thousands affected by chancellor Rachel Reeves’s move, announced in the Autumn Budget 2024, to change business property relief (BPR) so more estates pay IHT.

Family businesses are suddenly scrabbling for answers on what to do with firms in their hands for generations – in Wright’s case, three – when the current owner dies and the new rules mean IHT is due, when none would have been previously.

“It's almost like a personal failure, you're the generation that let the business go,” Wright said.

“We're the first girls in the business too, my sister and me, so for us, we're like, ‘Oh yeah, we can do this’. We love working in the business, and we're really proud of it. It’s just such a shame.”

While the qualifying conditions for BPR have not changed, the amount of relief will soon be capped. From 6 April 2026, the first £1 million of assets will be exempt from IHT. The rest will attract 50% relief (in effect producing a 20% tax rate). The £1 million will be shared across assets qualifying for BPR and agricultural property relief (APR) on a pro-rata basis.

“A million pounds sounds like so much money to one person, and it is, if I was just getting a million quid when dad died, but I’m not,” said Wright.

“It’s property across five sites, it’s a lot of equipment – diggers, processing equipment, it's all really expensive – and that's what the majority of our assets are. And each one of those is a seat, and that's a person in that, each lorry is someone’s job."

What are the inheritance tax options for family businesses?

Accountancy firm BDO called the changes “seismic”, adding “business owners should start to consider their longer-term objectives and wishes now, so they are prepared to act ahead of the new rules coming into force”.

But this warning does little to help Wright. Her father has spoken to accountants and financial advisers, who say the family has few options.

“We’ve been told leaving the business in trust is not possible because we deal with contaminated land and there's a serious environmental risk with the fact we are running a waste business, so solicitors won't touch it,” said Wright.

Another option is giving the business to her and her sister now. Gifts where the donor survives seven years continue to be exempt from IHT. “But I'm 25 and my sister's 21 and I, respectfully, understand why dad wouldn't want to do that at this point,” Wright said.

Most heartbreaking, she said, is her father is looking at moving overseas, and either restructuring the business or selling it before he goes. “But he has such an active role in our daily lives, it's really sad,” she said.

Taking the case to Parliament

Determined to make the case for family businesses like hers, Wright enlisted the help of her local MP Lee Barron, Labour member for Corby and East Northamptonshire.

Barron, Wright, her father and sister, went to Parliament to speak with Alistair Strathern, Labour MP for Hitchin, in his role as Parliamentary Private Secretary to the Chancellor of the Exchequer. They came away further frustrated.

“Alistair Strathern said we should just get an insurance policy. That's obviously been floated a lot, but dad's 63 so it doesn't really make any sense for an insurance company to insure against dying when you’re that age,” Wright said.

“We have spoken to a couple of insurers and they think it's just crazy that government officials think the insurance industry is going to pay this.”

According to Wright, she got the impression “that they're doing this [capping BPR] because it’s a policy of minimal uprising and minimal repercussions” – which she believes essentially means family businesses have no voice or representation and so would not fight back.

“We all – me, my dad and my sister – just came away feeling really frustrated. We all put our case forward, explaining we've got this business, and we've grown so much in the last couple of years, and we're doing this good thing.

“But Strathern knew nothing about business. He was just quoting macro-economic figures – and said the government had to do this because it couldn't hike corporation tax because that affects the financial markets.

“But it's the small and medium sized businesses that employ the majority of the country. It's the jobs that are at risk.”

A Treasury spokesperson said the reforms to agricultural and business property reliefs will mean three quarters of estates will continue to pay no inheritance tax at all.

"The remaining quarter will pay half the inheritance tax that most estates pay, and payments can be spread over 10 years, interest-free. This is a fair and balanced approach which helps fix the public services we all rely on," they added.

“Capping the rate of corporation tax, reforming planning, establishing a National Wealth Fund and creating pension megafunds is part of our Plan for Change to get Britain building, unlock investment and support business so we can raise living standards and make all parts of the country better off,” they said.

Family business fire sale

Growing up, Wright said her father “always paid a lot of tax, and he's always been very proud to pay tax” generated from a business that “has been central to dad's life, central to his parents’ lives, and now our lives”.

To pay this latest tax, however, a fire sale may be the family’s only option. She fears in a year’s time when the new IHT policy comes in, the market may be flooded with families looking to sell up, leading to rock bottom prices for firms.

But Wright doesn’t want to leave the green industry, which she expects she will if the business is sold.

“We feel like the work we're doing is so important. It's just like a life calling”, she said. Wright pointed to pro-recycling government announcements as a reason Britain needs more, not fewer, businesses like Storefield.

The government said in November it is “committed to moving towards a zero waste, circular economy”, to create a “future where we keep our resources in use for longer and reduce waste” and where “we see investment in critical infrastructure and green jobs”.

“There is such a demand in this sector for talent. Everyone says sustainability is so important but it's crazy the shortage of people that actually want to work on recycling,” Wright said.

Job losses predicted

Family businesses in all sectors are expected to be affected by the IHT rule change. Some owners have already reacted to the new BPR policy by taking steps to cut costs to mitigate an approaching higher IHT bill.

In a poll of 4,000 businesses and farmers on the frontline of the changes to BPR and APR, lobby group Family Business UK found as many as 60% said they will cut investment in their enterprises as a result of needing to cover a looming IHT bill.

Around a quarter (23%) have reduced headcount. At a national level, by the end of this Parliament, the changes could lead to 208,500 jobs lost from family businesses and across their supply chains, their analysis suggests.

For Wright, forced to carry out macabre calculations, without a change in policy the future looks bleak.

“In my head I’m sitting here thinking, ‘Right, so dad drops dead, this business has to pay wages, and these IHT debts are now suddenly dropped on the business too’.

“Anyone who has taken a business over because the owners have died will tell you those first months, it could really go either way. You're finding your feet. You're trying to keep the business going, and keep the momentum going that the old owner had.

“You’re at your weakest. At that point to have another pretty insurmountable debt of inheritance tax, to be honest, it's just the end of it, really.”

Will you be affected by inheritance tax rule changes? If you'd like to share your story, get in touch by emailing editor@moneyweek.com.