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Wealth managers say wealthy Brits are increasingly giving away money to family members as concerns grow that Rachel Reeves could tighten the inheritance tax regime.
Tax advisers told the Financial Times they had seen an increase in gifts and requests to mitigate inheritance taxes since October budgetwhen the Chancellor unveiled plans to impose an inheritance tax on pensions and agricultural land.
Reeves last month ruled out an emergency spring budget. But some analysts and advisers have warned it could expand the inheritance tax even further to support the government’s budget plans.
The fears have led to more people giving money away under the current regime, which does not apply 40 per cent IHT to gifts unless the benefactor dies within seven years.
“The seven-year rule is now up for grabs, that seems to be the next goal,” said Nimesh Shah, managing director of the auditing firm Blick Rothenberg. “You could extend it to 10 years. Now inheritance tax is the focus of concern.”
Olly Cheng, financial planning director at Rathbones, said the asset manager was seeing “huge concern about where the government will target next” after measures targeting pensions and farmers.
“Many people feel that further tax increases will be needed to balance the books, and the result of this uncertainty is that people are bringing forward gifts that may have been made later,” he added.
Concerns about increased IHT come even as the government’s revenue from the levy continues to rise, with HM Revenue & Customs taking in £6.3 billion between April and December 2024.
The government collects less than 1 percent of total revenue from inheritance taxes, but Reeves’ pledge at last year’s general election not to increase income tax, national insurance or VAT rates has left it with little scope to raise revenue.
This week Reeves announced a rollback of tax reforms for wealthy non-doms after warning that her proposals would drive people to leave Britain. But Shah said the changes would have “no impact on the direction of IHT”.
Wealth managers said many more of their clients could expect their assets to fall within the scope of IHT over the next decade, with some attributing the increase in gifts to changes to HMRC’s treatment of pensions and agricultural land.
Unused pension holdings will be included in the estate from April 2027 and will be subject to the standard tax rate of 40 percent. Meanwhile, from April 2026, landowners will have to pay a 20% levy on agricultural land above a threshold of between £1.3m and £3m, depending on whether they are married and whether they own a home.
Emma Sterland, head of financial planning at Evelyn Partners, said pension and property tax reform was the reason “clients are thinking about making financial gifts to their families”, with the Budget proving IHT is “in the Treasury’s crosshairs”. stand.
Ian Cook, a chartered financial planner at Quilter Cheviot, said he was encouraging clients to “consider gifting more strategically” in light of impending pension tax reforms, after more clients began “looking for ways to grow their wealth over the course of their life.” to pass on life.”
The Treasury Department did not immediately respond to a request for comment.