Inheritance tax raid won't fix finances, says economist

Rachel Reeves has been accused of “coming for your family's future” with a possible inheritance tax raid – but a former Treasury adviser has warned the changes still won't be enough to fill the £50bn black hole.

- MILLIE COOKE

Officials are thought to be looking at scrapping the “seven-year rule” - which means that no tax is due on any gifts you give if you live for seven years after giving them - to help address the UK’s multibillion-pound shortfall left by Labour U-turns, higher borrowing and sluggish economic growth.

The possible raid on inheritance tax comes just days after the National Institute of Economic and Social Research piled pressure on the chancellor to come up with solutions ahead of her Budget in the autumn.

But Jonathan Portes, a former Treasury adviser and professor of economics and public policy at King’s College London who supports the idea of inheritance tax reform, told The Independent such changes would “certainly not raise tens of billions of pounds, or anything like it”.

Tory shadow chancellor Sir Mel Stride accused Labour of punishing working families to “fund their failure”, while leading analysts at Hargreaves Lansdown warned Labour may “come to regret” making detailed changes to inheritance tax as it could hamper efforts to boost economic growth.

Inheritance tax is paid when a person's estate is worth more than £325,000 when they die and is seen by many as a form of wealth tax in all but name. Under current UK rules, gifts made more than seven years before a person’s death are exempt from inheritance tax.