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Inheritance Tax
Government considers
Inheritance Tax reforms
Tightening gift-giving regulations is among the measures being considered
The UK Treasury is seeking further new ways to reduce the growing
deficit ahead of the much-anticipated Autumn Budget. With a financial
shortfall exceeding £40 billion, reports suggest that officials, under the guidance
of Chancellor Rachel Reeves, are exploring potential changes to Inheritance
Tax (IHT) rules. Tightening gifting regulations is just one of the measures being
considered to increase revenue and stabilise the country’s finances.
While they may succeed in bolstering public
昀椀nances, concerns over fairness and the
potential impact on middle-income families loom
large. Conversely, measures speci昀椀cally targeting
ultra-wealthy estates and large-scale gifts could
potentially gain broader public acceptance.
The Treasury has not yet con昀椀rmed any
decision, but it is clear that no revenue-raising
strategy is being ruled out. With the Autumn
urrent market conditions, sluggish
C
in policy and could impact taxpayers involved in
economic growth, persistent in昀氀ation
long-term estate planning. Other aspects of the
and rising unemployment have
gifting framework, including the taper rate itself,
put signi昀椀cant pressure on public
are also reportedly being reviewed.
a wealth tax, the government is reportedly
BABY BOOMERS’ WEALTH
spending. Although there have been calls for
considering the less politically sensitive option of
TRANSFERS UNDER SCRUTINY
reforming IHT thresholds.
Alongside organisational reforms, focus is
shifting to the vast intergenerational wealth
POTENTIAL GIFTING
expected to pass from baby boomers. Increasing
CAPS UNDER CONSIDERATION
property prices, substantial pension pots and
One option being considered is the introduction
accumulated wealth have created a 昀椀nancial
of a lifetime cap on tax-free gifts. Currently,
landscape the Treasury doesn’t want to overlook.
individuals can pass on assets without tax if these
Last year signalled an early indication of the
gifts are made at least seven years before their
government’s plans to align pensions with IHT.
death. Gifts made between three and seven years
From April 2027, unused pension funds and
prior that are above the donor’s nil rate band are
most death bene昀椀ts will be incorporated into the
taxed on a sliding scale on the excess above the
IHT regime, ensuring these assets contribute
nil rate band, with rates decreasing annually from
to government revenue during the largest
32% to 8% in what’s known as ‘taper relief’.
generational transfer of wealth in history.
By implementing a cap, the government could
08
restrict the total value of assets or monetary gifts
PUBLIC SENTIMENT AND NEXT STEPS
exempt from IHT rules, regardless of when they
If such reforms are implemented, they are likely
are given. This would represent a signi昀椀cant shift
to spark debate across the political spectrum.
Budget just around the corner, taxpayers would
do well to stay informed about potential changes
that may impact their estate planning e昀昀orts. t
Do you need to act now to
secure your financial future
and maximise your assets?
If you would like further guidance or
professional advice on how potential
Inheritance Tax changes could a昀昀ect your
昀椀nances or estate planning, please contact
us sooner rather than later.
This article does not constitute tax, legal or 昀椀nancial advice
and should not be relied upon as such. Tax treatment
depends on the individual circumstances of each client and
may be subject to change in the future. For guidance, seek
professional advice. The value of your investments can
go down as well as up, and you may get back less than
you invested. The Financial Conduct Authority does not
regulate estate planning, tax advice or trusts.
