Treasury weighs inheritance tax reforms

The Treasury is weighing inheritance tax changes to raise revenue as it faces a £50bn budget gap ahead of the autumn Budget.

Treasury weighs inheritance tax reforms to close £50bn budget gap

The Treasury is reportedly weighing changes to inheritance tax to raise revenue as it faces a £50 billion gap ahead of the autumn Budget. Options under consideration include a lifetime cap on gifts outside the tax, tighter rules for gifts made within seven years of death, and changes to taper relief. The Guardian reports that no substantive talks at a senior level have occurred and no decisions have been made.

Chancellor Rachel Reeves has ruled out increases to income tax, national insurance or VAT, while inheritance tax brought in a record £6.7bn in 2022-23. Some analysts warn that wealthy investors have left the UK in part due to measures such as the abolition of non-doms, which adds pressure on public finances. The Treasury says its focus remains growth and cites planning reforms that are expected to boost the economy and lower borrowing.

Tax policy in a small, open economy must walk a tight line between raising funds and maintaining trust. The inheritance tax debate reflects a practical choice: find revenue without triggering broad political backlash or capital flight. If reforms are framed as closing loopholes and simplifying rules, they stand a better chance of public acceptance. But the risk is real: even well intentioned changes can create perceived unfairness or invite new loopholes that undermine the goal of fairness.

Highlights

The autumn Budget will show whether reform rhetoric translates into credible policy.