London, August 15, 2025 — With the UK’s public finances under severe pressure, the Treasury is exploring controversial inheritance tax (IHT) reforms as a potential lever to help plug a widening budget deficit expected to exceed £40 billion by the time of the autumn budget.
Sources close to the matter have confirmed that officials are reviewing ways to raise additional revenue from wealth transfers, including tightening rules on lifetime gifting of assets and cash — a common method used by families to reduce IHT liabilities.
Currently, individuals can give away wealth tax-free if they survive for seven years after the gift, with “taper relief” applying on gifts made within three to seven years of death. However, proposed changes may include a lifetime cap on gifting, along with adjustments to the taper rate, which would result in more estates being pulled into the IHT net.
“There’s a growing recognition that wealth stored in property and other assets needs to be taxed more effectively,” a government source said. “With thresholds frozen and house prices surging, the system already brings in more — but there’s further room to close loopholes and ensure fairness.”
Despite rising political pressure, especially from Labour MPs advocating for a broader wealth tax, Chancellor Rachel Reeves has maintained the government’s pledge not to increase taxes on “working people.” However, that has left her with limited room to maneuver, particularly amid sluggish economic growth, persistent inflation, and a four-year high in unemployment.
Reeves has previously defended her move to reduce tax breaks for farmers passing on agricultural businesses — a decision that sparked protests and criticism. In a recent interview in Northern Ireland, she doubled down, saying: “Those with over £3 million to pass on should make a contribution. That’s about fairness.”
With the public mood historically sensitive to IHT changes — famously dubbed the “death tax” during a 2007 political battle — any new reforms are expected to be politically charged. Yet officials insist the goal is to avoid burdening earned income while addressing wealth inequality and stabilizing the UK’s deteriorating fiscal outlook.
While no final decisions have been made, the Treasury is expected to present concrete proposals for IHT reform as part of the upcoming budget in November.
