IHT raid on small corporations threatens new properties objective

Labour has been warned that thousands of family-run construction suppliers could disappear under its inheritance tax policies, putting its housebuilding target in jeopardy.

David Wernick, chairman of Wernick Group, sounded the alarm over future homes, as well as jobs and prices in the sector, as family-owned enterprises face death duties of 20 per cent from next month.

He said his fourth-generation business, which employs 1,000 people, is among those that have been ‘effectively condemned to selling assets or taking on debt simply to survive’.

The 92-year-old firm supplies temporary buildings and vital kit needed on construction sites for residential developments, schools and hospitals. In her Budget in 2024, Rachel Reeves announced changes to Business Property Relief that left family firms facing inheritance tax (IHT) of 20 per cent on assets worth more than £1m from this April.

In jeopardy: Labour has been warned that thousands of family-run construction suppliers could disappear under its inheritance tax policies

The Chancellor later raised the threshold to £2.5m, or £5m for married couples, but the move has not eased concerns across the sector.

Now fresh doubt has been cast over Labour’s ability to meet its pledge to build 1.5m homes by the next election, should the policy go ahead. 

Wernick said: ‘This goes beyond fairness. If family firms are forced to scale back investment or exit altogether, jobs will be lost, capacity will tighten and costs will rise – making it even harder to deliver 1.5m new homes and the infrastructure the country needs.’

Net additions to the housing stock are set to fall from a 260,000 annual average to a low point of 220,000 in 2026-27, according to the Office for Budget Responsibility.

This week, campaigners will challenge the policy, and a similar new rule on agricultural property, in the High Court. They will argue the Government acted unlawfully through a late consultation process.

Wernick said: ‘The irony is that inheritance tax reforms risk achieving the opposite of what Labour claims to want. If growth is the objective, you back firms that reinvest and expand productive assets – not push them towards private equity or consolidation focused on shorter-term returns.’