How could inheritance tax change at the Budget?
Why potential inheritance tax changes could impact you
- Chancellor Rachel Reeves faces pressure to find at least £22bn for the upcoming 26 November Budget, while sticking to Labour's pledge not to increase income tax, national insurance or VAT for 'working people'.
- This financial challenge is prompting the Treasury to consider various smaller tax adjustments, with inheritance tax (IHT) being a key area of focus.
- Inheritance tax currently affects only about four per cent of UK families, with a £325,000 tax-free allowance per individual and exemptions for assets passed to spouses or civil partners.
- Recent reforms include the 'tractor tax' capping agricultural property relief from April 2026 and bringing private pension wealth into IHT from April 2027, alongside a freeze on the tax-free allowance until at least April 2030.
- Potential new tweaks under consideration reportedly include a lifetime cap on gifts made before death, a review of gift relief tapering and a further extension of the freeze on tax-free allowances.