A family member of one of the industry’s biggest construction firms has accused the government of ignoring warnings over the impact of inheritance tax changes.
Wates board member James Wates, who also chairs advocacy group Family Business UK (FBUK), said it lobbied HM Treasury on keeping Business Property Relief (BPR) in the run-up to the Budget last October but hit a “blank wall”.
In an exclusive interview with Construction News, Wates said: “They didn’t want to listen to us.”
In the Budget, chancellor Rachel Reeves announced reforms to BPR that mean many previously exempt privately-owned family-run businesses will from April 2026 face inheritance tax bills.
Under the proposed changes, only the first £1m of the value of a family business will be completely exempt from inheritance tax.
The remaining share of the business will be subject to a 50 per cent relief, meaning beneficiaries will pay 20 per cent rather than the 40 per cent levied on a personal estate.
The tax can be paid in instalments, with the first due six months after the person has died.
For family members who inherit a £50m construction business, this means they will pay inheritance tax at a rate of 20 per cent on £49m. This would leave an inheritance tax bill
of £9.8m.
Wates said the impact of the tax change would be “pretty seismic” and could impact other CN100 firms including Sir Robert McAlpine, Willmott Dixon and Bowmer & Kirkland.
He warned investment decisions will be made more difficult because returns on growth would increase the future tax bill.
“Family-run construction firms have got to think about how they plan succession and how they can afford to pay the tax when it becomes due,” he said. “Does that mean I invest in the business? Or do I have to take some money out to protect myself for the future?”
Wates said that if the government presses ahead, the sector could be reduced as families would sell up rather than continue.
He warned: “What is likely to happen is that more businesses will be sold. They’ll be snapped up by private equity and bigger competitors. The uniqueness that comes with our businesses being in the community and working with people will go.”
And Wates warned that family-run businesses will not let the matter drop.
“This is the first skirmish in a long battle,” he said. “The case for BPR is so sound that we have to ensure that even if this government [removes it], a future one will bring it back.”
An HM Treasury spokesperson said in a statement: “Our commitment to the construction sector is resolute – by capping corporation tax at 25 per cent, confirming full permanent expensing, and establishing a National Wealth Fund and pension megafunds, our Plan for Change will get Britain building and unlock investment across the UK.”
Other family-run construction firms also said the changes would change business plans.
Read our full-length long read about the discontent within construction about the inheritance tax changes: Unhappy families: the impact of new inheritance tax rules
