Chancellor turns the screw on hated IHT

CHANCELLOR Rachel Reeves is said to be plotting the biggest inheritance tax crackdown in decades, exploring ways to raise billions by tightening the rules on gifts. Families who want to pass wealth down the generations could soon find it far harder and more expensive to do so, if they can do it at all.

- By Harvey Jones

Officials are said to be examining controversial measures such as a lifetime cap on gifts, a longer “potentially exempt transfer” window and changes to inheritance tax (IHT) taper relief.

The goal is to raise more revenue while keeping the Government’s election promise not to raise income tax, National Insurance or VAT.

Of course, this isn’t the first time Reeves has targeted inheritances.

In last year’s Budget she extended the freeze on the £325,000 nil-rate band and £175,000 main residence allowance to 2030, and imposed IHT on unused pensions from April 2027.

IHT receipts have risen by 50% in the last five years, and the Office for Budget Responsibility forecasts bills will top £9billion this tax year. That figure is only going to climb over time. Families who fail to plan ahead are most likely to get caught out.

CAP

Rachael Griffin, tax and financial planning expert at Quilter, said a lifetime cap on gifts would mark “a fundamental change to the way families pass on wealth”. “The UK has never had such a limit, and if it were set too low it could affect a large number of middle-class estates, particularly in areas where property wealth alone can easily breach frozen thresholds,” Griffin said.

At present, any gift is exempt from IHT, provided you live for another seven years after making them.