UK households are facing what experts are calling an “unwelcome hat-trick” of inheritance tax (IHT) changes in the upcoming Labour government’s Autumn Budget. Chancellor Rachel Reeves will deliver the Budget on November 26, amid growing speculation about further adjustments to inheritance tax rules.
Tom Selby, Director of Public Policy at AJ Bell, explained, “The government has already announced IHT changes targeting farmers and pensions. Another set of changes in this Budget would represent a third significant challenge for those hoping to pass wealth to loved ones without heavier tax burdens.”
With the UK’s financial outlook increasingly strained—it’s estimated Reeves must find around £50 billion to meet her strict fiscal targets—options for raising revenue are limited. Selby notes, “Since changes to employee income tax, National Insurance, and VAT have been ruled out, inheritance tax is seen as one of the few levers the government can pull without harming economic growth or provoking unrest among public sector workers.”
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Potential measures might include reducing inheritance tax thresholds or extending the ‘seven-year rule’ on lifetime gifts. Given current thresholds are frozen and generate extra revenue over time via fiscal drag, modifying gifting rules could be seen as a less politically risky alternative. However, Selby warns, “IHT remains one of the most unpopular taxes in Britain, so any new moves will undoubtedly carry political consequences.”
Tax lawyer James Quarmby, partner at Stephenson Harwood, cautioned, “If the Chancellor begins taxing lifetime gifts more aggressively, it could backfire and jeopardize re-election prospects. Potentially Exempt Transfers currently mean just 4% of estates pay IHT, but nearly 30% of people mistakenly think they will. This disconnect makes middle-class taxpayers especially sensitive.”
He added, “Eliminating these reliefs wouldn’t just raise revenue—it would ignite a political firestorm. The Labour Party’s reputation as a high-tax, high-spend party means targeting middle-class assets risks serious backlash.”
Rachael Griffin, tax and financial planning expert at Quilter, highlighted research indicating UK retirees gift about £2,500 annually to family members, often supporting education and living expenses. “Introducing a lifetime gifting cap would be a marked change from existing policy,” she says. “The UK has never imposed such a limit, and if set too low, it could impact many middle-class estates, particularly where property wealth exceeds frozen IHT thresholds.”
She also warned the administrative challenges, “HMRC would face the daunting task of managing long-term records of gifts spanning decades, increasing the likelihood of disputes where documentation is incomplete.”
As the Budget date approaches, uncertainty remains over the scale and design of inheritance tax reforms, leaving many families concerned about the future cost of passing on wealth.