Chancellor Rachel Reeves’s reported plans to focus on wealth and belongings in subsequent month’s Finances will hit owners onerous, in line with David Alexander, chief government of DJ Alexander.
The Scotland-based property agent stated ongoing hypothesis in regards to the November Finances continues to counsel potential tax will increase on property, with proposals anticipated to incorporate main modifications to inheritance tax (IHT).
Authorities sources have indicated that the chancellor is specializing in so-called “unearned wealth” as a part of efforts to plug an estimated £50bn hole within the public funds.
Inheritance tax is at present charged at 40% on belongings above the £325,000 threshold, with an extra £175,000 allowance for a important residence handed to a direct descendant.
Below current guidelines, limitless presents to mates or household stay exempt from IHT, supplied they’re made a minimum of seven years earlier than demise.
Newest HMRC figures present a report £8.2bn was raised in IHT through the 2024–25 tax 12 months, and receipts are forecast to climb to just about £14bn by 2030. The surge is being pushed by the frozen tax thresholds, with the £325,000 nil-rate band unchanged since 2009 — a degree which might now stand at £523,130 if it had tracked inflation.
Public opposition to inheritance tax seems to be rising. A YouGov ballot of two,200 folks discovered 54% of respondents imagine the levy needs to be abolished altogether — up from 49% final 12 months — as extra households than ever are drawn into paying it.
Wealth managers additionally report a pointy improve in shoppers transferring belongings early amid considerations the federal government could prolong the exemption interval to 10 years or take away sure reliefs in an effort to spice up Treasury revenues.
Fairness launch advisers stated they’d seen an increase in enquiries from over-55s following modifications to IHT introduced in final 12 months’s Finances. There was a 10pc year-on-year improve within the whole unlocked from properties within the second quarter of 2025, in line with the Fairness Launch Council, who stated the pattern was primarily pushed by new debtors taking £126,422 on common from their properties.
Alexander defined: “There’s a view that IHT is one thing that solely impacts upon the very wealthiest in society. We’re informed that this tax solely hits these with “the broadest shoulders” and that most individuals shouldn’t fear as it’ll solely have an effect on a small sector of society. The reality is that it more and more impacts on increasingly abnormal owners who’ve merely seen the worth of their property improve during the last three many years. To state that somebody who has paid a mortgage and saved all their life and amassed belongings price over £325,000 in now wealthy is clearly not a practical definition of rich.”
“Certainly, it received’t be the wealthiest who might be most affected however largely those that have benefitted from rising home costs during the last twenty years. The richest in society have accountants and advisers who’re in a position to severely cut back their legal responsibility whereas probably the most affected might be these with smaller estates who might be drawn into paying this tax.”
He continued: “The idea by the chancellor is that owners will merely sit again and let this occur to them. The fact is that any change will generate big behavioural modifications which is able to cut back the quantity any improve in IHT will convey. There’s already proof that that is occurring as folks have elevated the scale of presents given to relations previous to the Finances and extra are withdrawing worth from their properties by means of fairness launch. There’s, in reality, a stronger argument for lowering the speed, eradicating among the exemptions and anomalies within the system which might truly end in increased returns for the Treasury.”
“These tax modifications goal abnormal British folks. It’s people who find themselves working very onerous, increase a pension, and paying off their mortgage. These are people who find themselves doing every part that the system is telling them to do and but they’re now to be penalised for doing the best factor.”
Alexander added: “It may possibly’t be proper that this particular group – who’ve saved, purchased a house, and paid right into a pension – needs to be seen as a simple goal for elevated taxation. That is counter intuitive in any society the place the encouragement of thrift, effort, saving, and work is being punished reasonably than rewarded and these people had been merely hoping that their lifelong efforts would end in them with the ability to present a nest egg for his or her households.”
