For years, family families have been able to pass on their businesses to their descendants without worrying about inheritance tax (IHT). Thanks to Labour chancellor Rachel Reeves, that is about to change.

The Budget will force many family firms to sell what is often the project of several lifetimes. Many could be broken up and asset stripped by marauding private equity firms, making everyone poorer.

Families face paying IHT bills running into tens of millions from their own pockets. That’s money they don’t actually have, as one businessman explains

James White faces paying a potential £26million in extra inheritance tax thanks to Labour’s IHT raid on small businesses.

James, 39, is the deputy managing director of Leicester-based pharmaceutical company Nova Laboratories, founded by his father Peter, 76, in 1994.

Nova formulates and manufactures a range of branded medicines to treat niche and rare diseases, and remains privately owned and funded.

Companies like these are the backbone of the British economy and Nova has been valued at £130million, based on its share value.

In the Budget, chancellor Rachel Reeves announced changes to business property relief that would see firms like this one pay IHT on part of their enterprise above £1million at 20%, half the standard 40% IHT rate.

The change will come into force from April, 6, 2026.

IHT bills will be massive, but they must be paid by the individual owners rather than the business.

James estimates that this will leave him facing a £26million bill that he simply cannot pay. “It is 40 times the value of our family’s home and all of our possessions.”

James told the Express that in practice the total tax bill will be even bigger. “After income and dividend taxes have been paid, Nova would need to pay me more than £40million to cover the IHT bill.”

That’s money the business will no longer have to carry out valu able research and development. “This would destroy our ability to reinvest and grow,” Peter said.

One option is for Peter to gift all of his shares to James as a potentially exempt transfer, but Peter would have to survive for another seven years for to completely escape IHT on their value.

Putting the business into a trust is another option, but with Labour planning to review the rules in 2025, this may not work either.

Selling part of the business wouldn’t work as any buyer would want a controlling interest.

Ultimately, this means James won’t be able to continue with the business after his father dies. But it gets worse.

Ownership won’t just pass out of the hands of a family that has nurtured it for three decades, but probably out of the UK altogether.

James said: “The most likely outcome would see the company sold on my father’s passing, most likely to foreign private equity. Thirty years of steady and sustainable business building would be consumed to fund less than 12 minutes of public sector spending.”

Peter and James might consider setting up a new business, but they definitely wouldn’t do so now in the UK. “We would seriously consider moving abroad.”

Thousands of business owners face the same threat and Labour refuses to acknowledge the damage it’s about to do.

This isn’t just a family tragedy in the making. It’s a national one. Why bother to set up a business if you can’t pass it on to the next generation? Plus it’s also a massive tax on success.

And if private UK companies get broken up by foreign-owned private equity companies, the measure will ultimately cost taxpayers a lot more than it raises.

Labour must think again.