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Affluent Britons are increasingly gifting money to family members as concerns mount that Rachel Reeves could make the inheritance tax regime more punitive, according to wealth managers.
Tax advisers told the Financial Times they had seen an increase in gifting and enquiries about mitigating death duties since before the October Budget, when the chancellor set out plans to levy inheritance tax on pensions and agricultural land.
Reeves last month ruled out an emergency spring Budget. But some analysts and advisers have warned that she could cast the inheritance tax net even wider in a bid to shore up 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 to gifts unless the benefactor dies within seven years.
“The seven year rule is now up for grabs, that seems to be the next target,” said Nimesh Shah, chief executive of accountancy firm Blick Rothenberg. “You could widen it to 10 years. Inheritance tax is now at the fore of concerns.”
Olly Cheng, financial planning director at Rathbones, said the wealth manager was “seeing a lot of concern about where the government will target next” after its measures targeting pensions and farmers.
“There is a feeling among a lot of people that there will need to be more tax increases to balance the books, and the consequence of this uncertainty is that people are bringing forward gifts that might have been made later,” he added.
Concerns about increased IHT come even as the government’s receipts from the levy continue to climb, with HM Revenue & Customs, the tax authority, collecting £6.3bn between April and December 2024.
The government raises less than 1 per cent of total revenue from death duties, but Reeves’ pledge during the general election last year not to increase rates of income tax, national insurance or VAT has left her little wriggle room to raise revenue.
This week Reeves signalled a softening of tax reforms for wealthy non-doms following warnings that her proposals were driving people to leave Britain. But Shah said the changes would “have no impact on the direction of IHT”.
Wealth managers said that many more of their clients faced the prospect of their estates falling within the scope of IHT over the next decade, with some attributing the increase in gifting to the changes to HMRC’s treatment of pensions and agricultural land.
Unused pension pots will be included in estates from April 2027 and subject to the standard 40 per cent IHT rate. Meanwhile, landowners will from April 2026 be subject to a 20 per cent levy on agricultural land above a threshold of between £1.3mn and £3mn, depending on whether they are married and if they own a home.
Emma Sterland, chief financial planning director at Evelyn Partners, said the reforms to pensions and land taxation were behind a rise in “clients thinking about making financial gifts to their families”, with the Budget evidence that IHT was “in the Treasury’s crosshairs”.
Ian Cook, a chartered financial planner at Quilter Cheviot, said he was encouraging clients to “consider gifting more strategically” in view of the upcoming pensions taxation reforms after more had begun “exploring ways to pass on wealth during their lifetime”.
The Treasury did not immediately respond to a request for comment.
