CBI Report Reveals £14.8bn Economic Hit from UK Inheritance Tax Changes

A comprehensive independent report has exposed the severe economic consequences of recent inheritance tax reforms across the United Kingdom. The analysis, conducted by CBI Economics for Family Business UK, predicts devastating impacts on family businesses and agricultural sectors.

What Does the CBI Report Reveal About UK Inheritance Tax Reform Impacts?

The report forecasts a staggering £14.8 billion loss in Gross Value Added (GVA) over the next five years. This analysis draws from data collected from 4,147 family businesses and farms across the UK, providing unprecedented insight into the reforms’ economic consequences.

Business Property Relief (BPR) and Agricultural Property Relief (APR) changes form the core of these controversial reforms. The modifications target family businesses and farms that previously benefited from inheritance tax exemptions.

The scale of economic disruption extends far beyond initial government projections, with ripple effects anticipated across multiple sectors and regions throughout the UK.

How Many Jobs Could Be Lost Due to These UK Inheritance Tax Changes?

The report predicts potential job losses of 208,500 full-time positions across the UK economy. These figures represent a substantial threat to employment stability in family-run businesses and agricultural communities.

Agricultural sectors face particularly severe consequences, with 28,300 job losses predicted specifically within farming and associated supply chains. This represents a significant blow to rural economies already struggling with post-Brexit challenges.

Wales faces disproportionate impacts, with 9,715 job losses expected alongside a 12.2% reduction in business turnover. The Welsh agricultural sector, which employs approximately 58,000 people, could see devastating consequences from these changes.

What Are the Fiscal Implications of These UK Inheritance Tax Reforms?

The report estimates a net fiscal loss of £1.9 billion over the period, despite government expectations of raising £1.8 billion in tax revenue by 2030. This counterintuitive outcome reflects reduced economic activity and associated tax receipts.

The Treasury’s calculations appear to have overlooked broader economic consequences of the reforms. Reduced business investment and activity generate less corporation tax, income tax, and National Insurance contributions.

Family businesses contribute significantly to UK tax revenues through various channels. The report suggests that inheritance tax gains may be offset by losses in other tax categories, creating a net negative fiscal impact.

How Will These Changes Affect Different UK Business Sectors?

Agricultural and horticultural sectors expect the greatest declines in both business turnover and investment levels. These sectors form the backbone of rural economies across England, Scotland, Wales, and Northern Ireland.

Manufacturing family businesses also face significant challenges, particularly those requiring substantial capital investment for machinery and equipment. By inheriting a property and a business, the inheritance tax burden may force asset sales or business closures.

Service sector family businesses, whilst less capital-intensive, still face succession planning difficulties. Professional services, retail, and hospitality businesses may struggle to maintain family ownership through generational transitions.

What Do Welsh Agricultural Leaders Say About These UK Inheritance Tax Changes?

Gareth Parry, Head of Policy at the Farmers’ Union of Wales, describes the findings as “alarming, although not surprising.” His response reflects widespread concern within Welsh agricultural communities about the reforms’ potential impacts.

The FUW has consistently warned about these consequences since the Budget Statement announcement. Welsh farmers face particular challenges due to land values and the capital-intensive nature of modern agriculture.

Wales could see a £580 million reduction in GVA, representing a substantial blow to the Welsh economy. Rural communities, already facing economic pressures, may struggle to absorb such significant impacts.

What Questions Remain About UK Treasury Justification for These Reforms?

Industry leaders question how long the Treasury can ignore comprehensive evidence of negative economic impacts. The report provides detailed analysis contradicting government assumptions about the reforms’ benefits.

Family Business UK commissioned this independent analysis specifically to challenge Treasury calculations. The findings suggest that official projections significantly underestimate the broader economic consequences of inheritance tax changes.

Research indicates that 76% of family businesses expect to reduce investment due to inheritance tax uncertainty. Additionally, 43% of agricultural businesses are considering selling assets to manage potential tax liabilities.

The debate continues over whether the government will reconsider these reforms in light of mounting evidence of their negative economic impacts. Industry groups are calling for collaborative policy development to address legitimate concerns whilst maintaining fiscal objectives.

For detailed analysis of the inheritance tax changes, visit Family Business UK or access comprehensive farming impact assessments through NFU Cymru. These resources provide sector-specific guidance for navigating the changing tax landscape.