Inheritance tax changes under consideration amid spending gap concerns

Independent

18 hours ago

The Treasury is reportedly exploring options to raise additional revenue from inheritance tax ahead of the autumn budget.
According to The Guardian, officials are examining whether tightening rules around the gifting of assets and money could help address the UK's multi-billion-pound fiscal shortfall.
Government U-turns over winter fuel payments and welfare reform have left Chancellor Rachel Reeves with a multibillion-pound spending gap to fill, amid similarly controversial pushes for a 'wealth tax' by some Labour MPs.
Among the reported inheritance tax measures under consideration is a potential cap on lifetime gifts, part of a broader review into how assets can be transferred before death to minimise inheritance tax liabilities.
A Treasury spokesperson said: '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.'
Under current UK rules, gifts made more than seven years before a person's death are exempt from inheritance tax.
Gifts made between three and seven years prior are taxed on a sliding scale, depending on their value and the total estate.
Last week, National Institute of Economic and Social Research (Niesr) predicted Rachel Reeves is now set for a £41.2 billion shortfall on her 'stability rule' in 2029-30 and has been left with an 'impossible trilemma' of trying to meet her fiscal rules while fulfilling spending commitments and upholding a manifesto pledge not to raise taxes.
She will need to raise taxes or cut spending in the autumn budget to plug the gap, Niesr cautioned.
In July, some Labour Party figures, including former leader Lord Neil Kinnock and Wales's First Minister Baroness Eluned Morgan, called for a wealth tax.
Ms Reeves has not ruled out the possibility of a new wealth tax but has been eager to highlight that she will stick to her commitment not to hike tax for 'working people'.
However, Business Secretary Jonathan Reynolds dismissed the idea.
'This Labour Government has increased taxes on wealth as opposed to income – the taxes on private jets, private schools, changes through inheritance tax, capital gains tax,' he told GB News.
'But the idea there's a magic wealth tax, some sort of levy… that doesn't exist anywhere in the world.
'Switzerland has a levy but they don't have capital gains or inheritance tax.
'There's no kind of magic (tax). We're not going to do anything daft like that.'