Inheritance Tax: Family-owned Businesses

Richard Baker Excerpts

Tuesday 3rd June 2025 Westminster Hall

[James Murray]

I believe that the hon. Lady is asking about the taxation of large multinational firms operating in the digital space. I am sure that she is aware of the digital services tax, which is currently in operation. The Government are committed to maintaining that until the pillar 1 international solution is implemented, and I am sure that she is familiar with pillar 2 of the OECD deal on a global minimum corporate tax rate. Large multinational firms are well dealt with on the international level, which is why, in opposition and in government, we have supported the OECD’s two-pillar solution.

I do not want to be distracted from the design of the reforms that we are talking about today. Where inheritance tax is due, those liable for a charge can pay any liability on the relevant assets over 10 annual interest-free instalments. That benefit is not seen anywhere else in the inheritance tax system.

There has been a lot of discussion of the impact of this policy, so let me set out the numbers, based on HMRC claims data. It is expected that, under these reforms, about 1,500 estates claiming only business property relief will pay more inheritance tax in 2026-27. Two thirds of those estates—about 1,000—are expected to only hold shares designated as not listed on the markets of recognised stock exchanges, such as the alternative investment market. Under these reforms, about three quarters of estates claiming business property relief in 2026-27, excluding estates only holding shares designated as not listed, will not pay any more inheritance tax in 2026-27.

The reforms to relief have generated a lot of commentary about the wider impacts, but hon. Members should take care when relying on analysis based on self-selecting surveys from members of representative groups campaigning against the reforms. Indeed, the independent Office for Budget Responsibility is clear that it does not expect this measure to have any significant macroeconomic impacts, and it certified the costing at autumn Budget 2024. It said that the reforms to agricultural property relief and business property relief are forecast to raise a combined £520 million in 2029-30.

[Richard Baker (Glenrothes and Mid Fife) (Lab)]

I recognise the need for the Government to raise funds, given the economic context that they inherited, but, as my hon. Friend the Member for Dunfermline and Dollar (Graeme Downie) said, a number of family businesses have come forward with alternative proposals that would raise the funds in a different way. Would the Minister and his team be prepared to meet and consult with family businesses to ensure that they have input into the plans? That would enable those businesses to inform them of their experiences and raise alternative proposals that might raise funds differently.

[James Murray]

I reassure my hon. Friend that I, and the wider team of officials, have had a number of meetings with representatives of family businesses and the agricultural and farming sector. We have listened to ideas raised by a number of people we have met, as well as ideas raised in debates in the Commons and in meetings in the Treasury and elsewhere. We have listened, but we remain confident that our approach is a fair way to balance supporting farms and businesses with fixing the public finances, so we stand by our reforms.

I should probably conclude. I thank all hon. Members, particularly the hon. Member for Mid Dunbartonshire, for their contributions to the debate.

Question put and agreed to.