Incoming changes to inheritance tax will deal a blow to the building-materials sector and could threaten government plans for 1.5 million homes to be built during the current parliamentary term.
Builders Merchants Federation (BMF) chief executive John Newcomb warned that the measures announced in the Autumn Budget could force leading merchants to cut their staff numbers and limit investment plans.
“Early indications are that the proposed changes to business property relief (BPR) pose significant concerns to family-owned businesses,” he wrote in a letter to prime minister Keir Starmer. He also warned that the plans had caused “undisguised alarm and dismay” to all sorts of businesses in the UK.
From April 2026, a £1m cap will be set by the government on assets eligible for 100 per cent BPR relief. Assets above this threshold will have a reduced 50 per cent relief.
Newcomb said: “Most BMF members are now reviewing their sales and trading forecasts for the next two years and looking at investment decisions, stock levels and staffing numbers.”
The measures could force builders’ merchants to “defer or cut back” plans to upgrade their production lines, replace their plant or machinery or add to their product ranges, he said.
They may also decide to postpone plans to open new branches or take on more staff, including apprentices, the BMF added.
Builders’ merchants now face a “double tax bill”, Newcomb said: the new BPR rate of 20 per cent and the 39.35 per cent dividend rate of tax.
Nick Howarth, director at Howarth Timber, one of the BMF’s 1,000 members, also warned that the changes “greatly reduce the incentive to set up and run a family enterprise”. He added that they could jeopardise the government’s plans to build 300,000 new homes a year, plus new hospitals and schools.
“The situation […] threatens the viability, and even survival, of family firms, and potentially undermines the model of multigeneration ownership,” he said.
The BMF joins a growing collection of trade bodies in the construction sector warning that the planned inheritance tax changes will hit the sector hard.
Last month, the Construction Plant-hire Association (CPA) and Scottish Plant Owners Association said plant firms could be forced out of business.
In an interview with Construction News last week, CPA chief executive Steven Mulholland called the changes to inheritance tax – coupled with increased employers’ National Insurance contributions – “very, very narrow-minded”.
As well as having an impact on businesses’ bottom line, he said the changes risked exacerbating mental health difficulties among those working in the construction sector, especially at small and medium-sized firms.
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Joshua Stein