The parking lot of Millbrook Garden Centre in Gravesend, Kent, is bustling on this warm Wednesday lunch hour. The café is thriving, and upstairs, a newly established event space is accommodating children’s groups during the half-term break. “There’s never a dull moment in a garden centre,” remarked Tammy Woodhouse, the managing director.

The unseasonably warm spring has positively impacted the plant trade; however, Woodhouse is concerned about new tax implications. Shares in her family business, founded by her parents in 1979, now face inheritance tax for the first time due to modifications introduced in last year’s budget by Rachel Reeves.

Starting in April of next year, Business Property Relief (BPR) on small businesses will be reduced for entities with shares valued over £1 million. Inheritances exceeding this threshold will incur a 20 percent inheritance tax (IHT). While this rate is lower than the standard 40 percent IHT, the financial burden can still be substantial.

This change may compel company owners to reserve funds for unexpected expenses, thereby reducing investments in their businesses—or risking the need to sell them when the tax liability arises.

Woodhouse expressed, “There was no consultation, and it has probably affected many more businesses than people realize.” She summarized the sentiment of many small business owners: “We occupy a large site. The property holds significant value. Yet that does not mean we have a lot of cash readily available to address a hefty inheritance tax bill.”

This concern resonates with farmers, who have vocally opposed similar budget measures that restrict agricultural property relief, highlighting that their enterprises are often asset-heavy yet cash-strapped. However, the BPR alterations affect a wider array of businesses.

“The issue concerning business property relief is considerably more significant than that of agricultural property relief,” stated Joe Tipper, managing director of Tippers, a building-supply firm established in 1916 in the Midlands. “This is not to diminish the struggles faced by farmers, but they have been quicker and more effective at uniting their voice through the NFU [National Farmers’ Union].”

How extensive is the family business sector? According to Family Business UK (FBUK), approximately 93 percent of all private companies in the UK are family-owned, employing around 15.8 million individuals.

The negative implications of the BPR changes are prompting small businesses to reconsider their investment strategies. A forthcoming report from FBUK indicates that over 200,000 jobs may be at stake. Their survey of more than 3,000 enterprises showed that 68 percent had sought legal counsel, while 55 percent had suspended or scrapped planned investments.

The Treasury defends the BPR adjustments as a measure to prevent misuse by individuals attempting to claim relief for shares in publicly listed companies on Aim, the junior stock market. They argue that three-quarters of estates will continue to owe no inheritance tax. A spokesperson stated, “The remaining quarter will pay half of the typical inheritance tax obligation, and payments can be extended over ten years without interest.”

Despite this, many small business proprietors view the changes as an affront to the principles of family-owned companies. Douglas Anderson, joint managing director of GAP, a Glasgow-based plant hire firm, commented, “We prioritize long-term investment and sustainable growth. Our major competitors are public companies with a far shorter vision.”

Anderson, who has been part of the family business founded by his father in 1969 for 45 years, added, “Investing in assets without a long-term perspective will compromise the proper management of the business. This proposed BPR reform fundamentally undermines that approach.”

Tipper, 42, emphasized his firm’s commitment to fostering long-term relationships with employees and the local community, underscoring its underlying purpose. “Strategic long-term thinking leads to decisions beneficial for society at large,” he stated.

Business owners find the perceived inequity of the measures particularly disheartening, noting that the inheritance tax revisions do not apply to publicly traded companies or foreign enterprises. Anderson asserted, “This directly targets family-run businesses. It’s unjust, uncompetitive, and frankly appalling.”

For those businesses facing IHT repercussions, there is apprehension that owners may be forced into distressed sales, contradicting the original BPR intent from the 1970s—designed to enable businesses to transition across generations without fragmentation, as noted by Paul Falvey, a tax partner at the accounting firm BDO.

He compared the current government stance toward family firms with that of Germany, where a thriving “Mittelstand” comprises mid-sized businesses with strong generational legacies. “In Germany, significantly more businesses are successfully passed down through generations, serving as a cornerstone of their economy,” he remarked.

Business owners now grappling with potential inheritance tax liabilities have limited options. They can gift shares and hope to evade passing away within seven years or place shares in a trust, though these methods typically require relinquishing control.

The Labour party’s recent reversal on unpopular policies, including the elimination of the winter fuel allowance, has ignited hopes for reconsideration of BPR adjustments.

Anderson noted, “On one hand, they stress the importance of growth. Yet, they enact measures that produce the opposite effect; it’s absurd. However, it’s not humorous at all.” He revealed that his company, GAP, has suggested to the Treasury a straightforward solution: apply inheritance tax on shares solely if inheritors sell them within seven years.

Currently, there are few indications that the Treasury will reconsider its stance. They project that BPR and agricultural relief modifications will generate £520 million by the fiscal year 2029-30.

Should no reversal occur, “from next April, we anticipate truly devastating outcomes,” cautioned William Lees-Jones, 60, the managing director of JW Lees Brewery in Manchester, which has been in family ownership for seven generations. “Individuals may consider relocating to Switzerland. The last thing they wish is for their lifetime achievements to culminate in a tax obligation, compelling them to sell their business.”

Back in Gravesend, Tammy Woodhouse is contemplating the compounded challenges of national insurance increases, rising living wage rates, and the implications of BPR. “We’ve reduced hiring this year. It’s increasingly difficult to manage a small business effectively.”

Nonetheless, she remains resilient about her garden centre’s future. “When the sun shines, it’s the best kind of business.”