Question to the HM Treasury:

To ask the Chancellor of the Exchequer, whether her Department has made an estimate of the number of family businesses that may be required to (a) sell and (b) downsize as a result of the reduction in Business Property Relief; and what assessment she has made of the potential impact of the behavioural responses on the public finances.

The value of an ownership of a business, or share of a business, is included in an estate for inheritance tax purposes. Business property relief reduces the value of the interest in the business or its assets when calculating how much inheritance tax is due on the value of the estate.

Excluding claims by estates only holding shares designed as “not listed” on recognised stock exchanges, the Government has set out that around 500 estates claiming business property relief only in 2026-27 are expected to pay more inheritance tax as a result of the reforms announced at Autumn Budget 2024. Any potential impact on businesses will depend on the individual circumstances, including the size of the inheritance tax liability, the ownership structure, and the value of non-business assets in an estate available to pay a liability. Furthermore, where any inheritance tax is due, those liable for a charge can in most circumstances pay any liability on the relevant assets over 10 annual instalments, interest-free. The independent Office for Budget Responsibility (OBR) does not expect the reforms to have any significant macroeconomic impacts.

The behavioural impact of policies is accounted for in the normal way in the costings certified by the independent OBR. The OBR recently published more detail on the costings for the reforms to agricultural property relief and business property relief, including the potential behavioural responses, at https://obr.uk/download/october-2024-economic-and-fiscal-outlook-costing-of-changes-to-agricultural-and-business-property-relief/?tmstv=1739194105.