Rachel Reeves has been urged to scrap an inheritance tax raid on family firms altogether after a massive U-turn.

Businesses cheered Labour’s climbdown, which will see a rise in the threshold for death duties on family businesses and farms from £1million to £2.5million.

That means spouses will have a tax-free allowance of £5million between them.

The move comes after a huge backlash from family businesses, from farmers to breweries and hoteliers, over plans to levy inheritance tax on family farms and firms worth more than £1million from April 2026.

The Daily Mail has been highlighting the impact on businesses, adding to the pressure on Labour to reverse course.

But now family firms have called to be excluded completely from the ‘tax on ambition’, as many are still bracing for inheritance taxes of 20 per cent from April next year.

Steve Perez, founder of Global Brands, the drinks firm behind Hooch and VK, said the change ‘doesn’t go nearly far enough’.

The British entrepreneur says he has no plans to revive a £20million investment axed due to higher taxes.

He had been meaning to extend his plant at Clay Cross in Derbyshire and to build an extension and spa at the nearby Peak Edge Hotel in Chesterfield.

Perez said: ‘It’s good that the Government has at last recognised that its tax grab on the family firms that make up the backbone of our economy is untenable, as the Daily Mail has repeatedly highlighted.

‘Family businesses make up over 90 per cent of firms and employ over half the workforce. So this change is welcome, but doesn’t go nearly far enough.

‘It won’t help many of the medium-sized businesses that are the biggest and best employers. It’s a tax on entrepreneurs’ ambition to grow a business bigger than £2.5million. 

It will still mean businesses pulling back on investment and jobs. Rachel Reeves needs to go further and save our family firms by junking the entire tax raid.’

Steve Rigby, chairman of support group Family Business UK, said: ‘Raising the cap to £2.5million, or £5million for married couples, is the right thing to do to reinvigorate investment and growth among smaller family businesses and farms.

‘Retaining the cap for businesses valued higher than this remains a challenge and we look forward to continuing our work with Government on solutions that will give them the confidence they need’.

Shadow chancellor Mel Stride criticised the decision to make a U-turn so close to Christmas, saying: ‘They have put families through hell, only to water down their proposals at the last minute.’

William Lees-Jones, managing director of JW Lees Brewery, added: ‘It’s a start and very welcome – reverting to 100 per cent relief would be even better, but the Government has listened and that’s progress.’

Kate Nicholls, chair of trade body UK Hospitality, said: ‘Family-run businesses are part of what makes much of hospitality so special, with generation after generation taking on the family pub, restaurant or hotel to continue its legacy.

‘The original changes to business property relief put all of that at risk, with businesses up and down the country suddenly facing tax bills running into tens of thousands of pounds.’

Sir Rocco Forte, chairman of Rocco Forte Hotels, one of the UK’s best-known family businesses, said: ‘This Government has no understanding of the importance of family businesses or it would never have mounted this tax raid in the first place.

‘The climbdown that has been announced goes nowhere near far enough. Business property relief needs to be maintained in full for family companies so that their importance to the economy continues to be recognised.

‘If this doesn’t happen, firms will cut back on investment and jobs as they prepare for huge tax bills they can’t pay.

‘The only responsible course for a Chancellor who says growth is her top priority is a full U-turn.’