John Healey eyes another tax raid as family businesses warn they are being pushed ‘to extinction’

The Treasury is plotting to make the change by replacing the existing capital gains tax with income tax, leaving business owners exposed to paying higher bills to HMRC.

Families are currently able to restructure their businesses using “redeemable shares”.

The move allows ownership to be transferred while paying capital gains tax at a maximum rate of 24 per cent.

However, changes being mulled over by No11 could see businesses face an income tax rate of 45 per cent.

Changing the rules could mean a business owner paying tax of up to £450,000 on a £1million business if they handed it down to the next generation using redeemable shares, up from £240,000 under the current regime.

The move would also mark another blow for family-run firms after Labour’s controversial inheritance tax changes, which are expected to raise more than £300million.

Shadow Chancellor Andrew Griffith told The Telegraph: “This Labour Government seems determined to squeeze every part of the economy, punishing the people who take risks, create jobs and build businesses for future generations.

“Not content with its Family Business Tax, Labour is once again coming after the very firms that keep our local economies running.

“Family businesses are the backbone of Britain. They provide jobs, support local communities and are often built over decades through hard work, sacrifice and personal risk.

“These changes are set to make it easier to sell a family business than to pass it on to your own children. That cannot be right.”

Reform UK’s Treasury spokesman Robert Jenrick added: “Yet another tax raid on unsuspecting family businesses because Labour cannot get the benefits bill under control.”

British business owners have also been left facing increased costs, including from an increase to the minimum wage.

Analysis by consultants at EY-Parthenon, released on Monday, found that 65 UK-listed companies issued profit warnings between July and September.

The report marked a near two-year high for struggling businesses.

However, Downing Street is trying to reduce speculation of large tax rises ahead of Mr Healey’s first Budget as Chancellor on October 28.

Mr Healey is expected to increase the business rates threshold from £12,000 to £18,000.

The move is expected to result in thousands of high-street shops, cafes and pubs no longer paying business rates.

No11 was also mulling over expanding the mansion tax by reducing the threshold from £2million to £1.5million.

Despite speculation ahead of October 28, Labour MPs in affluent seats remain confident Mr Healey will not push ahead with the threshold reduction.

Meanwhile, the Chancellor looks set to announce a fuel duty freeze amid concerns of spiralling energy costs.

Mr Burnham has already cut VAT on household electricity bills, saving a typical household in England, Scotland and Wales £45.

A Treasury spokesman said: “As has always been the case, decisions on tax are a matter for the Chancellor to set out at fiscal events, rather than routinely commenting on rumour, speculation or proposals.”