Family-run construction suppliers and business owners are raising alarms over new inheritance tax rules set to come into effect in April. The policy, announced in the Chancellor’s 2024 Budget, involves changes to Business Property Relief and could see family-owned firms facing a 20 per cent inheritance tax on estates exceeding £2.5 million, or £5 million for married couples.
Industry leaders warn that the reforms may undermine Labour’s pledge to deliver 1.5 million new homes before the next general election, while also affecting jobs, investment, and the stability of the housing supply chain.
Policy changes challenge family-run construction suppliers
From April, amendments to the Business Property Relief scheme will require family-owned businesses with assets above the threshold to pay a 20 per cent inheritance tax on qualifying sums. The policy originally set the threshold at £1 million, but this was subsequently increased to £2.5 million per individual and £5 million per married couple following sector feedback.
David Wernick, chairman of Wernick Group, which employs 1,000 staff and supplies temporary buildings to construction sites, has warned of the significant risks these firms face.
“Family businesses are effectively condemned to selling assets or taking on debt simply to survive,” he said. Many industry players fear the need to liquidate core business assets or accrue debt will limit their ability to operate and invest in growth.
Labour’s housebuilding targets under scrutiny
Labour has committed to delivering 1.5 million new homes in the current parliamentary term. However, the impact of the new inheritance tax rules on the supply chain has prompted concern within the industry.
Representatives argue that if family-owned construction firms are weakened, the supply of key materials and services will shrink, threatening planned increases in housebuilding. Wernick Group’s chairman stressed that the reforms may force some firms to scale back investment or exit the market altogether, reducing overall sector capacity.
“Jobs will be lost,capacity will tighten and costs will rise making it even harder to deliver 1.5 million new homes,” Wernick said.
Sector voices concerns on investment and employment
Business groups have stated that family-run enterprises tend to reinvest profits locally and support long-term employment. Policy changes that increase financial burdens on such firms, they say, risk favouring short-term gains by private equity or consolidated corporations instead, with diminished local benefits.
“These changes go beyond fairness. If growth is the objective, you need to back firms that reinvest and expand productive assets,” Wernick added. There are widespread fears that increased tax liabilities could prompt the sale or restructuring of local businesses, leading to job losses and diminished sector dynamism.
Housing market outlook and OBR projections
The Office for Budget Responsibility (OBR) projects that net annual additions to housing stock are likely to fall from an average of 260,000 to a low point of 220,000 in 2026–27. Industry analysts warn that supply chain pressures resulting from the inheritance tax change could further slow construction, potentially derailing government targets.
Combined with other economic headwinds, the prospect of reduced housebuilding poses risks for the wider property market and could impede progress on tackling the longstanding challenge of housing shortages.
Legal challenge and political response
This week, campaigners are mounting a legal challenge to the inheritance tax policy and accompanying changes relating to agricultural property. It is argued that the consultation process was insufficient and that the government may have acted unlawfully by introducing reforms with significant sector impact at short notice.
Industry organisations and affected businesses are seeking clarity and possible mitigation. The government has defended its consultation process and reiterated its goal to balance fair taxation with support for economic growth, although concerns from stakeholders remain robust.
Final Summary
The introduction of new inheritance tax measures targeting family-owned businesses has triggered concern across the construction sector. Industry leaders argue that higher financial burdens threaten the survival of long-standing firms, stability of the housing supply chain, and Labour’s ambitious housebuilding objectives.
With projected reductions in housing output and a legal challenge under way, the future of many family-run suppliers hangs in the balance. As economic and political debates continue, businesses and observers are watching closely for any further policy adjustments.
For ongoing updates and practical tools relevant to business owners and taxpayers, the Pie app can provide support.
