Chancellor considers tax raid on family business transfers

Summarised from 2 outlets · Updated 19 Oct, 08:43 · Archive

John Healey is reportedly considering levying income tax on business transfers to heirs.

John Healey has reportedly drawn up plans for a tax raid on family businesses ahead of his first Budget. The Chancellor is considering proposals to levy income tax when business owners hand their company down to their children, potentially almost doubling the tax bill, according to City AM's report.

Under current rules, transfers can be structured to attract capital gains tax, which is charged at a lower rate than income tax. Healey is reportedly mulling whether to shut off a route owners frequently use: converting holdings into 'redeemable shares' which the business can buy back using its own profits. This move currently attracts capital gains tax at 24 per cent for higher-rate taxpayers, compared to 45 per cent on income tax.

Accountants have warned that Healey's plans could drive many family businesses into 'extinction' and discourage new companies opening their doors. The Treasury is looking to raise hundreds of millions on top of Rachel Reeves' previous crackdown on family businesses through inheritance tax, which is expected to generate £300m a year.

How it is being reported

• Labour's new raid on family firms as Chancellor 'plots to charge income tax on share scheme'Chancellor John Healey could target a mechanism often used to pass businesses down to the next generation without incurring crippling costs.Daily Mail · 19 Oct, 09:20
• Healey plots Budget raid on family businessesJohn Healey has reportedly drawn up plans for a tax raid on family businesses ahead of his first Budget, as he scrambles to avoid spending cuts. The Chancellor is considering proposals to levy income tax when business owners hand their company down to their children, potentially almost doubling the tax bill, according to a report [...]City AM · 19 Oct, 08:25

In this story: John Healey · Rachel Reeves · Treasury

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