Inheritance tax warning as Reeves's tax grab to cost more than it makes: 'No one is safe!'

The tax raid on family businesses and farms is expected to generate £1.38billion in extra inheritance tax revenue over five years, but the loss of economic activity will lead to a £2.6billion reduction in other tax income, according to an analysis by CBI Economics.

Its report says the Treasury has “underestimated the impact” of changes to business property relief (BPR), with the majority of family businesses forced to cut investment because of the raid.

The changes to BPR will introduce a 20 per cent levy on inherited business assets worth more than £1million when someone dies. Agricultural Property Relief (APR) is also being limited, meaning farmland will face new taxation.

The measures are set to take effect from August 2026, with the Office for Budget Responsibility estimating they will raise £520million by 2029-30.

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Most small businesses and farms will not be affected by the changes, according to Government assurances. However, the CBI Economics analysis shows that 125,678 jobs will still be lost as a result as many family businesses will be forced to cut their investments.

The loss of economic activity will lead to a £2.6billion reduction in income from taxes such as corporation tax, income tax and national insurance over the next five years, the research suggests.

This is much more than the estimated £1.38billion in extra inheritance tax Reeves hopes to raise from cutting BPR, meaning that the Exchequer will be £1.26billion worse off than under the status quo.

Kemi Badenoch, Conservative leader is set to warn that "no one is safe" from Labour's tax raid in a speech at the Business Property Relief Summit in London today

Badenoch will say Labour's charm offensive to businesses has quickly given way to "the worst raid on family business in living memory."

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Nigel Farage, the reform leader criticised Reeves as "no economist," claiming her measures show a "total lack of understanding of the private sector".

Tim Farron, the Liberal Democrat environment spokesman warned the tax hike would lead to "the collapse of so many family farms and countless jobs."

In an open letter to Reeves, Family Business UK, representing 32 trade associations and 160,000 family businesses, has urged the chancellor to reconsider the inheritance tax changes.

The letter warns that businesses and the economy will be "starved of much-needed investment leading to forced, premature business sales and the loss of jobs in constituencies across the country".

Family Business UK's analysis suggests the changes could result in a £1.25billion net fiscal loss due to reduced business activity and job losses. Labour has responded that it inherited a multibillion-pound funding gap and needs to repair public finances.

Neil Davy, chief executive of Family Business UK, called the changes a "hammer blow" to businesses.

He warned that many inheritors would have "no alternative but to sell up when the owner dies," potentially to foreign-owned competitors who would pay little or no tax in Britain.

Some small business owners have already shelved investment plans and halted recruitment, Davy revealed, stating that staff at family businesses are "worried about how these changes might impact them".

Davy called for the chancellor to meet and run a formal consultation to protect family businesses' long-term interests.

The economic impact of the Budget tax raid is already showing signs, with the economy unexpectedly shrinking for two consecutive months by October.

James Reed, boss of one of the UK's largest recruiters, warned that falling job vacancies could signal an approaching recession after the Budget "spooked business".

Reed told Sunday with Laura Kuenssberg that job advertisements on his website were 26 per cent lower than last year.