Treasury considers inheritance tax reforms to fill £50bn spending gap in budget
Amid growing pressure regarding the state of the UK's finances ahead of the autumn budget, the chancellor is looking to address a blackhole left by Labour U-turns, higher borrowing and sluggish economic growth.
Economists have warned Ms Reeves that she must raise taxes or tear up her flagship borrowing rules to fill the shortfall in public finances.
According to a report in The Guardian, the Treasury is now looking at options on inheritance tax like changing rules to restrict the gifting of money and assets
Under current rules, unlimited amounts of money and assets can be gifted to relatives and friends which avoids inheritance tax, provided that it is gifted at least seven years before the benefactor dies.
Money given less than three years before is taxed at the full inheritance tax rate of 40 per cent, while gifts given between seven and three years has a 'taper relief' tax, which is between eight and 32 per cent.
The Guardian reports that the Treasury is considering a lifetime cap to limit the amount of money an individual can donate outside of inheritance tax, as well as reviewing rules around the taper rate.
'With so much wealth stored in assets like houses that have shot up in value, we have to find ways to better tap into the inheritances of those who can afford to contribute more,' a source told the newspaper.
'It's hard to make sure these taxes don't end up with loopholes that undermine their purpose. But we are trying to work out what revenue might be raised and how to ensure it's a fair approach.'
However, it has been reported that no substantive talks at a senior level have occurred about inheritance tax, and no decisions have been made.
Reeves has already ruled out increases to income tax, national insurance and VAT, while inheritance tax brought in a record £6.7bn in 2022-2023.
However, recent analysis that showed wealthy investors are leaving the UK because of measures such as the abolition of non-dom status has caused nervousness.
A Treasury spokesperson said: 'As set out in the plan for change, the best way to strengthen public finances is by growing the economy – which is our focus. Changes to tax and spend policy are not the only ways of doing this, as seen with our planning reforms, which are expected to grow the economy by £6.8bn and cut borrowing by £3.4bn.
'We are committed to keeping taxes for working people as low as possible, which is why at last autumn's budget we protected working people's payslips and kept our promise not to raise the basic, higher or additional rates of income tax, employee national insurance or VAT.'
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Last Saturday, I stood in Parliament Square and bore witness to the largest mass arrest in a single day in the last decade. The Metropolitan Police detained 532 peaceful protesters – an operation that will live in infamy. The demonstration was organised by Defend Our Juries, which had called on participants to sit peacefully on the Parliament Square lawn between 1pm and 2pm, holding signs that read: 'I oppose genocide, I support Palestine Action.' Organisers had expected around 500 people. In fact, thousands turned up. That morning, I had published an opinion piece in The Independent announcing that I would be there, holding a sign quoting Article 10 of the European Convention on Human Rights (ECHR): 'Everyone has the right to freedom of expression. This right shall include freedom to hold opinions and to receive and impart information and ideas without interference by public authority and regardless of frontiers.' 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Of the 532 arrests, 522 were for the simple act of holding placards supporting Palestine Action, under Section 13 of the Terrorism Act, which carries a maximum sentence of 14 years in prison. The statistics are as shocking as the scenes I saw. According to the police's own figures, 112 of those detained were in their 70s, and 15 in their 80s. Nearly half were 60 or older, with an average age of 54. The police waged a relentless campaign against the protesters. Many were frail, elderly, or disabled. I saw priests and vicars in clerical collars led away in handcuffs. I saw retired nurses and NHS healthcare workers in scrubs being taken into police vans. One of them, Nick, was interviewed, and asked if he was afraid. His reply was very moving and and it almost brought me to tears: 'I'm absolutely terrified. I'm shaking. I'll be honest with you. I nearly cried earlier. The thought of doing something like this is just awful, but it's even more awful if we don't do it. I mean, I think to myself, you know, I've seen things, not on the mass media. I've seen things that cannot ever be unseen. And if we don't protest about it, we're culpable.' I also saw Jewish protesters critical of the Israeli government's actions being arrested alongside climate and human rights activists, including Chris Romberg, 75, a former British Army colonel and the son of a Holocaust survivor. No one was spared. One image that is seared in my mind: an elderly blind man in a wheelchair being dragged away by multiple officers as demonstrators shouted 'Let him go!' and 'Shame on you, shame on you!' I also watched the police arrest a frail woman in her 80s suffering from Parkinson's disease, while her son pleaded with the officers not to arrest her. The Metropolitan Police's motto is 'Working Together for a Safer London', but it is hard to see how dedicating so many resources to policing a peaceful protest and arresting frail and elderly citizens exercising such an ancient British freedom achieves this objective. Jonathan Porritt, former environmental adviser to King Charles, referred to the UK government's policy as 'absolutely standard authoritarian tactics'. 'I've come to the conclusion that the UK government is incontrovertibly complicit in this genocide not just through the continuing sale of arms to Israel, but because of its reckless refusal to follow guidance to seek to prevent genocide in countries like Gaza.' This is exactly how states erode democratic freedoms – not in one sudden lurch, but in small, calculated steps, until dissent itself becomes a criminal offence. The decision to ban Palestine Action was itself the product of a cynical political ploy. Home secretary Yvette Cooper bundled the group together with two violent white supremacist organisations – the neo-Nazi Maniacs Murder Cult and the Russian Imperial Movement – and forced MPs to vote for all or none. Many later admitted they felt they had no choice but to approve the ban. As Yasmine Ahmed, UK Director of Human Rights Watch, has warned: 'Proscribing Palestine Action is a grave abuse of state power and a terrifying escalation in this government's crusade to curtail protest rights.' The crucial issue here is that Palestine Action exposed what it – and many of us – see as the UK's complicity in the commission of genocide by Israel against the Palestinian people. Since December 2023, the RAF has flown more than 600 surveillance missions over Gaza, reputedly to locate hostages. This is why ordinary citizens – older people, clergy, disabled protesters – were criminalised for condemning what we believe to be genocide and demanding accountability. 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The UK government has embarked upon a dangerous path. The right to peaceful protest, the cornerstone of our democracy – from the suffragettes to the anti-apartheid movement – is under attack. The government has conflated dissent with terrorism, and the police have acted as enforcers of political orthodoxy rather than guardians of public safety. When Benjamin Disraeli said in 1845 that 'a Conservative government is an organised hypocrisy', who could have imagined that his words would describe so aptly the current Labour government and its authoritarian home secretary? The question we must ask ourselves is simple: When history judges us, will we be remembered as those who stood against injustice, or those who stood by in silence? Parliament Square on 9 August was not just a police operation. It was a test of our democracy – and it is a test we are in danger of failing.
