In the UK’s upcoming Autumn Budget on October 30, changes to inheritance tax (IHT) are expected as part of Labour’s plan to address the fiscal deficit. Although exact measures have not been confirmed, several options are under consideration.
One possible change is extending the “seven-year rule” for lifetime gifts to ten years, which would mean gifts to children and others would only be IHT-exempt if the giver survives ten years from the time of the gift.
Additionally, Chancellor Rachel Reeves may look to adjust or tighten existing reliefs like Business and Agricultural Property Relief and potentially bring pension pots into IHT calculations. These moves would limit exemptions that wealthy estates currently utilize, potentially affecting beneficiaries of family businesses and agricultural land.
Further, applying capital gains tax on inherited assets is being discussed, which could create an effective “double tax” on inheritance above existing thresholds. This idea, however, has raised concerns due to the impact it may have on a wider range of households, given rising property values across the UK. Current allowances, like the £325,000 nil-rate band and the £175,000 allowance for main residences passed to children, have not increased in line with property inflation, thus increasing tax burdens for middle-income families.
These proposed changes, aimed at wealthier estates, may signal a broader intention to reform tax policy in a way that impacts larger inheritances while maintaining lower taxes on regular income, VAT, and National Insurance as per Labour’s manifesto. However, if implemented, these changes would likely prompt more people to review estate planning strategies.
If you are concerned about changes to the Autumn budget and want to review your estate planning, Farleys’ Private Client team are on hand to assist with matters ranging from the draft and reviewing of wills to the setting up of trusts with expert tax advice on hand. To discuss your requirements with one of the team please call 0845 287 0939, get in touch by email or through our online chat below.
