A third-generation business could be destroyed by Rachel Reeves's new inheritance tax regulations, a family has warned
Emily Wright, a 25-year-old who had no idea five years ago that she would be involved in a battle to save the family business, is now in danger of having it sold to cover an estimated £6 million inheritance tax bill that she has no other means of paying.
She was prepared for a career in the city managing other people's money after graduating from Royal Holloway University with a degree in economics. However, she joined the family business after COVID struck. She now has to worry about her personal finances due to new inheritance tax (IHT) regulations.
Together with those of her brother, sister, 63-year-old father, and 60 other employees at Storefield, a recycling company in Northamptonshire that her father established 30 years ago. The company was formerly a haulage company that her steelworker grandfather founded in 1960 and is currently in danger of being disbanded to pay death duties.
Speaking exclusively to BFIA, Wright described the rule changes that forced her and her siblings to pay a multi-million pound IHT bill, saying, "The sheer terror this policy has caused me is indescribable."
It is simple to calculate that the tax collector took ten of the forty trucks in the yard. The idea is nauseating. I lost ten jobs because I chose to work for the family business.
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What are the changes to the inheritance tax laws?
Chancellor Rachel Reeves' decision to alter business property relief (BPR) to require more estates to pay IHT, which was announced in the Autumn Budget 2024, has an impact on tens of thousands of people, including Wright's family.
In Wright's case, three, the current owner passes away and the new regulations require IHT to be paid when none would have been before, leaving family businesses suddenly frantically trying to figure out what to do with businesses that have been in their hands for generations.
"You're the generation that let the business go, and it's almost like a personal failure," Wright remarked.
As my sister and I were the first female employees in the company, we think we can succeed. We take great pride in the company and enjoy working there. It's just so unfortunate.
The amount of relief will soon be limited, even though the requirements for BPR have not changed. The first £1 million in assets will be free from IHT as of April 6, 2026. The remaining portion will receive a 50% reduction, which translates to a 20% tax rate. The one million will be distributed pro rata among assets that are eligible for both agricultural property relief (APR) and BPR.
For one person, "a million pounds sounds like a lot of money, and it is, if I was just getting a million quid when dad died, but I'm not," Wright said.
Its property is spread across five locations, and the bulk of our assets are made up of expensive equipment, such as processing and diggers. And each truck represents a person's job, and each of those represents a seat.
What options do family businesses have regarding inheritance tax?
The accounting firm BDO described the changes as "seismic" and added that "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."
However, this warning is of little assistance to Wright. According to financial advisors and accountants her father has consulted, the family doesn't have many options.
"Solicitors won't touch it because we deal with contaminated land and there's a serious environmental risk because we are running a waste business," Wright said, referring to the reason why leaving the business in trust is not feasible.
Another choice is to hand over the company to her and her sister right away. IHT is still not applied to gifts made by donors who live for seven years. Wright remarked, "But I understand why dad wouldn't want to do that at this point, respectfully, as I'm 25 and my sister is 21."
Her father's plans to relocate abroad and either restructure or sell the company before he does so are the most tragic, she said. According to her, "But he has such an active role in our daily lives, it's really sad,".
Do Rachel Reeves' changes to her inheritance tax need to be abandoned?
Bringing up the issue in Parliament.
Wright sought the assistance of Lee Barron, the Labour member for Corby and East Northamptonshire and her local MP, in order to advocate for family-run businesses like hers.
Barron, Wright, her father, and her sister visited Parliament to meet with Alistair Strathern, the Labour MP for Hitchin, who serves as the Chancellor of the Exchequer's Parliamentary Private Secretary. They departed even more irate.
We should simply purchase an insurance policy, according to Alistair Strathern. Of course, that has been floated a lot, but since Dad is sixty-three, it doesn't really make sense for an insurance company to cover death at that age," Wright stated.
"We've talked to a few insurers, and they find it absurd that government representatives believe the insurance sector will foot the bill.
Wright claims that she had the feeling "that they're doing this capping BPR because its a policy of minimal uprising and minimal repercussions," which she interprets to mean that family businesses would not strike back because they have no representation or voice.
"My sister, dad, and I all left feeling really irritated.... Each of us makes our case, stating that we have a business, have expanded significantly over the past few years, and are carrying out this beneficial endeavor.
However, Strathern had no business acumen. Just citing macroeconomic data, he claimed that the government was forced to take this action because raising corporation taxes would have an impact on the financial markets.
However, the majority of the nation's workforce is employed by small and medium-sized enterprises. The jobs are in danger.
Three-quarters of estates will continue to pay no inheritance tax at all as a result of the reforms to business and agricultural property reliefs, according to a Treasury spokesperson.
The inheritance tax that most estates pay will be paid in half during the remaining quarter, with interest-free payments spread out over ten years. The public services that we all depend on are being fixed by this fair and balanced approach," they continued.
"As part of our Plan for Change, we would cap the corporation tax rate, reform planning, create a National Wealth Fund, and create pension megafunds to get Britain building, unlock investment, and support business so we can better all parts of the country and raise living standards," they stated.
A man is positioned between his daughters, two younger women.
Emily Wright, her sister Charlotte, and her father Doug went to Parliament to argue against the changes to the IHT.
Sale of a family business that was fired.
Wright claimed that her father "always paid a lot of tax, and he's always been very proud to pay tax" while she was growing up. The money came from a business that "has been central to dad's life, central to his parents' lives, and now our lives."
However, a fire sale might be the family's only way to pay this most recent tax. When the new IHT policy is implemented in a year, she worries that the market will be overrun with families trying to sell, which would result in extremely low prices for businesses.
Wright, however, is adamant about staying in the green industry, even though she anticipates doing so if the company is sold.
"We believe that the work we are doing is extremely significant. She remarked, "It's like a calling in life." Wright cited government initiatives to encourage recycling as evidence that Britain needs more, not fewer, companies like Storefield.
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" are the goals of the government's November declaration that it is "committed to moving towards a zero waste, circular economy."
"Talent is sorely needed in this industry. The lack of individuals who genuinely want to work on recycling is absurd, despite everyone agreeing that sustainability is crucial, Wright said.
On the front of the haulage truck is the word "Wright's."
One of Emily's grandfather's first haulage trucks, which he established in 1960.
There will be job losses.
The IHT rule change is anticipated to have an impact on family businesses across all industries. A few owners have already responded to the new BPR policy by implementing cost-cutting measures in anticipation of an impending increase in their IHT bill.
A survey conducted by lobby group Family Business UK among 4,000 farmers and businesses affected by the BPR and APR changes revealed that up to 60% of them would reduce their investment in their businesses due to the need to pay an impending IHT bill.
About a quarter (23 percent) have cut back on staff. The changes could result in the loss of 208,500 jobs in family businesses and their supply chains nationwide by the end of this Parliament, according to their analysis.
Wright is compelled to make grim calculations, and the future appears dire unless policy is changed.
"I'm sitting here thinking, 'Well, so dad dies, this company has to pay wages, and these IHT debts are now abruptly thrown on the company as well.'".
"As anyone who has taken over a business after the owners have passed away will tell you, things could go either way in those initial months. You're getting used to your surroundings. Your goal is to maintain the company's operations and the momentum that the previous owner had.
"You are at your most vulnerable. To be honest, it's really the end of it at that point to have another nearly insurmountable inheritance tax debt.
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