Family-owned businesses in the UK have raised concerns about potential tax hikes in the upcoming Budget, fearing these changes could severely impact their ability to operate and invest in the future. According to a recent survey commissioned by Family Business UK and conducted by Censuswide, 85% of business leaders expect the government to raise taxes, with 35% anticipating significant increases.
The research highlights fears that rises in Corporation Tax, Business Rates, Capital Gains Tax, and Employer’s National Insurance could be on the horizon, despite Labour’s pre-election pledge not to increase these rates. The sentiment is particularly strong among family businesses, with over half (52%) rating the current government’s policies as unfavourable. The majority (80%) also expressed concerns that Labour had not been transparent with voters about their tax plans before the election.
Neil Davy, Chief Executive of Family Business UK, spoke out about the damaging effects of these concerns on the sector. “The Chancellor has promised not to raise Income Tax, National Insurance, or VAT, but ongoing speculation about increasing other taxes is already undermining business confidence,” he said. “While the government wants to promote growth and investment, many family businesses fear that vital tax policies supporting their ownership model could be scrapped.”
One of the key concerns centres around Business Property Relief (BPR), a long-standing policy that allows family businesses to transfer ownership without facing significant tax penalties. The relief, which has been in place since 1976, helps around 85,000 family businesses each year, ensuring they can continue to operate smoothly when leadership is passed on to the next generation.
The poll found that 67% of family firms view BPR as essential or important to their business model. Without it, many fear they could be forced to sell assets, with 31% saying they might sell off part of the business, while 20% worry they could be forced to sell entirely or even liquidate to cover the additional costs.
Davy urged the government to maintain the relief, warning that scrapping it could result in widespread negative consequences for the sector. “Business Property Relief is not just a tax policy, it’s a lifeline for family businesses. Removing it would disrupt the ability of these firms to invest and grow, which could have a devastating effect on jobs and local economies across the country,” he said.
The research also found that ongoing uncertainty over tax policies is already impacting decision-making within family businesses. More than 70% said they expect unfavourable policies to result in lower profits, while 63% indicated they would hold off on increasing their workforce in the next year.
Family-owned businesses play a critical role in the UK economy, with 4.8 million such firms employing 13.9 million people and contributing over £200 billion in taxes annually. Davy called on the Chancellor to dismiss calls to scrap BPR, which some critics argue is a loophole for the wealthy. Instead, he emphasised that the policy ensures fairness and enables long-term investment and growth across family-owned enterprises.
“Family businesses are at the heart of the UK’s economy, and it is crucial the government supports them rather than putting their future at risk,” Davy said.