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The upcoming changes to inheritance tax will deal a blow to the building materials sector and could jeopardize the government’s plans to build 1.5 million homes during the current legislature.
John Newcomb, chief executive of the Builders Merchants Federation (BMF), warned that the measures announced in the autumn budget could force leading merchants to reduce their workforce and limit investment plans.
“Early indications are that the proposed changes to Business Property Protection (BPR) pose significant concerns for family businesses,” he wrote in a letter to Prime Minister Keir Starmer. He also warned that the plans had caused “undisguised alarm and consternation” to businesses of all kinds in Britain.
From April 2026 The government will set a limit of £1 million on assets that qualify for 100 percent BPR exemption. For assets above this threshold, a reduced exemption of 50 percent applies.
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 staff numbers.”
The measures could force construction retailers to “delay or curtail” plans to upgrade their production lines, replace their factories or machines or expand their product ranges, he said.
They may also decide to postpone plans to open new branches or hire more staff, including apprentices, the BMF added.
Builders merchants now faced with a “double tax law,” Newcomb said: the new BPR rate of 20 percent and the dividend tax rate of 39.35 percent.
Nick Howarth, director of Howarth Timber, one of the BMF’s 1,000 members, also warned that the changes “significantly reduce the incentive to set up and run a family business”. He added that they could jeopardize 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 businesses and potentially undermines the model of multi-generational ownership,” he said.
The BMF joins a growing collection of trade bodies in the construction sector in warning that planned changes to inheritance tax will hit the sector hard.
Last month, the Construction Plant-hire Association (CPA) and the Scottish Plant Owners Association said factories could go bankrupt.
In an interview with Construction news last week CPA CEO Steven Mulholland called the changes in legacy tax – combined with higher employer contributions to national insurance – “very, very narrow”.
He said the changes were not only impacting the bottom line but also threatened to worsen mental health problems among those working in the construction industry, especially small and medium-sized businesses.
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