As always in the months leading up to the Autumn Budget, government ministers begin to drip-feed and leak possible changes that Budget announcements may hit.

Labour ministers have begun to discuss what could be a highly controversial tax raid on inheritance tax to help plug the £50 billion spending hole.

It is claimed that the Government are considering tightening inheritance tax rules around the gifting of assets. This is likely to be part of a broader review around how assets can be transferred during a lifetime to minimise inheritance tax liabilities.

The Chancellor, Rachel Reeves, has faced mounting pressure to raise revenue to strengthen public finances with either a wealth tax or an increase in income tax. Inheritance tax, often referred to as a death tax, taxes a person’s estate on death and is already seen by many as a form of wealth tax.

Two areas of Inheritance tax changes that are currently being considered are:

Cap on lifetime gifts

Under consideration is the potential to put a lifetime cap on the amount a person could gift before their death.

Currently, there is no limit on the amount you can gift to others (although there are complex rules to consider if you have also made gifts into a trust either before or after the date of an outright gift).

Seven-year rule

The government are also thought to be considering scrapping the ‘seven-year rule’ for gifts or changing the rules around taper relief.

Under current UK rules, no IHT is due on gifts given, provided you live for 7 years after giving them. Gifts given less than three years before death (where gifts are in excess of an individual’s £325,000 nil rate band) are taxed at the full inheritance tax rate of 40%. Taper relief is a percentage reduction in IHT for assets gifted between three and seven years before death. Taper relief currently reduces IHT to between 8% and 32% on a sliding scale, depending on the number of years before death the gift occurred.

[Tax note – beware making gifts of assets which are pregnant with a capital gain, as it is possible that you might trigger a charge to capital gains tax on a gift, always get advice on making gifts.]

No firm decision

It’s believed that no firm decisions have yet been taken, but as with the lead up to all Budgets, a drip feed or leak of information is always a way for the government to measure sentiment of a potential measure being considered.

Review your IHT plans

These measures, alongside the changes happening in 2027 to include pensions in an individual’s estate, mean that business owners and high-net-worth individuals need to seek professional advice to review their previous IHT tax planning.

Contact us for help and advice on minimising inheritance tax and how the potential Autumn Budget announcement could affect you and your family now and in the future.

Related Articles

Submit Your Advance Notification Form (ANF) for R&D Tax Relief

HMRC changes interest rates for early and late payments

EU VAT rules for virtual events