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Wealthy Britons are increasingly gifting money to family members as Mount – Rachel Reeves could make the inheritance tax regime punitive, wealth managers claim.
Tax advisers told the Financial Times they had noticed an increase in gifts and inquiries into the relief of death duties since before October Budgetwhen the chancellor intended to levy inheritance tax on pensions and farmland.
Reeves last month ruled out the spring emergency budget. But some analysts and advisers have warned that she could drop the inheritance tax even more widely in an effort to boost the government’s fiscal plans.
The fears have prompted more people to gift money under the current regime, which does not apply IHT at 40 per cent on gifts unless the donor dies within seven years.
“The seven-year rule is now up for grabs, which appears to be the next target,” said Nimesh Shah, managing director of accounting firm Blick Rothenberg. “You could extend it to 10 years. Inheritance tax is now the number one concern.”
Olly Cheng, director of financial planning at Rathbones, said the wealth manager “saw a lot of concern about where the government is going to target next” after its measures targeting pensions and farmers.
“There is a feeling among many people that larger tax increases will be needed to balance the books, and the consequence of this uncertainty is that people are making gifts that could be made later,” he added.
Concerns about increased IHT come even as the government’s collection receipts continue to climb, with HM Revenue and Customs, the Inland Revenue, collecting £6.3 billion between April and December 2024.
The government raises less than 1 per cent of total revenue from death duties, but Reeves’ pledge during last year’s general election not to increase rates of income tax, national insurance or VAT has left little room to raise revenue.
This week, Reeves hinted at a softening of tax reforms for the wealthy non-income earners after warnings that her proposals were driving people out of Britain. But Shah said the changes “will have no impact on the direction of IHT”.
Wealth managers said many other clients faced the prospect of their estates falling within the scope of IHT in the next decade, with some attributing the increase in gifting to changes to HMRC’s treatment of pensions and farmland.
Unused pension pots will be included in estates from April 2027 and subject to the standard rate of 40 per cent IHT. Meanwhile, from April 2026, landowners are subject to a 20 per cent levy on farmland above a threshold of between £1.3m and £3m, depending on whether they are married and own a home.
Emma Sterland, chief financial planning officer at Evelyn Partners, said pension and estate tax reforms had lagged behind “clients who are thinking about making financial gifts to their families”, with budget evidence that IHT was “in the Treasury’s crosshairs”.
Ian Cook, chartered financial planner at Quilter Cheviot, said he was encouraging clients to “consider gifting strategically” in light of the upcoming pensions tax reforms as more began to “explore ways to transfer wealth during their lifetime”.
The Treasury did not immediately respond to a request for comment.
