Wealth advisers have sounded the alarm over a potential inheritance tax grab in the Chancellor’s upcoming Spring Statement.
There are fears Rachel Reeves will change the rules that allow people to give away some of their wealth seven years before death without paying Britain’s most hated tax.
Experts say nervous families are rushing to gift their wealth before Labour tightens the tax noose, with some fearing Reeves will stop at nothing to rake in billions from hardworking Brits.
At present, inheritance tax (IHT) slaps a 40% charge on estates above £325,000 – but the seven-year rule allows people to gift assets tax-free if they live for seven years after giving them away.
Tax is applied at a lower rate if the individual dies within this seven-year period.
For example, if someone survives three years after giving the gift, the tax is applied at 32% rather than the IHT figure of 40%.
After four years, it drops from 32% to 24%. It comes down to 16% after five years and then 8% after six years.
A decision by the Chancellor to drag unused pension pots into the inheritance tax net in last October’s Budget has triggered fears that the gifting rule is her next big target.
Jason Hollands of Evelyn Partners warned that changes couldn’t be ruled out. He told The Telegraph: “There’s been a surge in concerns about inheritance tax. A change could be spun as an economic boost, but in reality, it’s just another tax raid.”
Nimesh Shah, boss of accountancy firm Blick Rothenberg, said: “Inheritance tax and gifting have shot to the top of conversations. People are already taking action before Reeves moves in.”
Wealth adviser Ian Cook added: “The seven-year rule is an easy target. Extending it to ten years would be a quick fix for the Treasury. I wouldn’t be surprised if we see a full review of the system.”
Despite IHT contributing less than 1% of total tax revenue, HMRC raked in a record-breaking £6.3 billion between April and December 2024 – proving that Britain’s hard-earned family wealth is already in the crosshairs of the taxman.
HM Treasury has downplayed concerns, simply stating: “Gifting assets is a normal part of the inheritance tax system.”
