The construction industry is calling on the Government to rethink its £1m inheritance relief tax cap if it wants to avoid seeing thousands of family-run businesses close.
- Private assets above £1m will be taxed at 20 per cent
- Thousands of family-run businesses will close
- 1.5m new homes target is at risk without the SME builder
Family-run construction firms doomed due to tighter inheritance relief cap
Smaller family-owned housebuilders will close putting the government’s target of building 1.5m new homes in jeopardy, claims the construction industry.
They are calling for the new £1m cap on inheritance tax relief on private assets and businesses to be scrapped or at least raised.Family businesses passing on assets worth more than this will be charged at 20 per cent from August 2026.
The National Federation of Builders, NFB, policy and market insight head Rico Wojtulewicz said:“Family firms need every penny they can get and with so many considering succession planning, the budget changes to inheritance tax will see many businesses choose to close or sell up rather than be passed on.
He added that the new £1m cap posed a threat to the Government’s target of building 300,000 new homes a year.
“This will directly reduce the number of companies delivering social homes, for housing associations, self-build and community land trusts.
“The Budget was anti-business and because proposed planning reforms are mostly tweaks, they should forget about its 1.5m new home target.”
He said despite the Government agreeing with the Competition and Markets Authority that SME housebuilders needed more support there was “no evidence they understood the challenges”.
The founder of one of the UK’s largest housebuilders Hill Group has already criticised the £1m cap.
Chief executive Andy Hill told The Times: “I think at some point they will change it back. I don’t think it has been thought through.”
Succession planning will be at risk
Sir James Wates, a director of Wates Group and the fourth generation to run the company, described the move as “seismic”.
“People will say what is the point of carrying on?Do I want to hand over this poisoned legacy to future generations? It makes it ripe and fair game for overseas investors to come in and pick up very good businesses on the cheap because the aspiration goes,” he said in an interview with The Times.
Sir James is a former chairman of the Construction Industry Training Board which helps young people gain skills to enter the industry where smaller firms are often instrumental in offering apprenticeships.
Finance brokers Hank Zarihs Associates said development finance lenders feared that those who inherit a business would sell up to avoid the prospect of finding millions of pounds to pay the tax man.
The increase in national insurance contributions from 13.8 to 15 per cent has meant many small businesses have said they cannot afford to hire new staff.
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