Reeves's inheritance tax raid will destroy generations of honest work
In 1891, Jonathan Fothergill became the managing director of Pickerings Limited, one of the oldest engineering firms in the country. Six generations later, the business remains in the ownership and management of the Fothergill family, trading out of its original site on Norton Road, Stockton-on-Tees.
But the future of that unbroken family connection suddenly seems much less assured.
For nearly 50 years, qualifying businesses have been allowed to pass assets down the generations without incurring inheritance tax. Business Property Relief (BPR), introduced by a Labour government in 1976, was designed to reduce the tax burden on transfers of business assets – encouraging the continuity of family businesses.
That is set to change, striking at the foundation of family firms such as Pickerings Limited.
Under new rules being brought into effect from April 2026 by Rachel Reeves, full business rates relief will only apply to the first £1m of a business's assets upon the owner's death. Everything above that threshold will be subject to 20pc tax.
This policy change has been branded 'myopic' by its critics. It might yield a one-off tax hit, but then what?
'Family businesses are now going to have to sell in order to pay the tax bill,' fears Kiran Fothergill, a descendant of Jonathan and director of Pickerings Lifts – as the company is now known – who stood as a Conservative candidate in the last general election.
'What we are going to end up with is businesses being sold to possibly foreign owners,' or corporations, with future revenues heading out of the country, into off-shore companies or other clever tax structures.
And with that, 'any feeling for the community or the history is lost'.
'Family businesses have a completely different time horizon to corporates,' Mr Fothergill explains – investing years into a business, building up a community of customers and employees. Corporate short-termism would likely mean job losses with generations uprooted.
'This policy change is a fallacy,' Mr Fothergill tells me. 'It's going to cost us as a society, and the structural damage to the UK economy would be irreparable.'
Lance Forman, the fourth-generation owner of H Forman and Son and a former Brexit Party MEP, agrees. His family has been curing and smoking fish in the East End of London since 1905.
' Family businesses are very, very different to corporations. They are profit satisfiers, not maximisers. As long as they make enough for the families to maintain the standard of living they are used to, they are satisfied.'
'We take the good years with the bad years,' he adds.
This is one star difference between family businesses and corporations, where the primary motivation is profit maximisation within a relatively short time frame – often through higher prices and job losses.
Is selling the only option? Tax professionals tell me the looming BPR changes are increasingly dominating discussions, especially at board level.
Mr Forman is sceptical of effective tax planning options available to his family.
'One other option would be to invest in an insurance policy, itself at a huge cost. But that would be instead of investing in the business. Where is the sense in that?'
'There's no incentive to build the business up for the new generation, to build a business for the future.'
The removal of tax relief is rarely a popular event, but the benefit to the wider society in some cases can outweigh the costs.
It is difficult to view the proposed changes as anything but a political miscalculation which strikes at the heart of business – aspiration.
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