Inheritance tax – widely regarded as Britain’s most loathed levy – is likely to become even more punitive as Chancellor Rachel Reeves considers measures to raise billions for the Treasury, warns global financial advisory giant deVere Group.
The Chancellor is reported to be exploring cuts to thresholds and tougher rules on lifetime gifts as part of efforts to address a fiscal gap of more than £50bn without breaking Labour’s election pledge not to increase headline tax rates on ‘working people.’
Official figures show receipts from inheritance tax have already surged to £7.5bn in the 12 months to June 2025, compared with £6.7bn in 2022/23 and more than double the amount collected a decade ago.
Nigel Green, chief executive of deVere Group, says: “Inheritance tax is the most resented tax we encounter – and for good reason.
“It’s viewed as a double taxation on assets that have already been earned, saved, and taxed over a lifetime. With the Treasury facing intense pressure to raise revenue, it appears almost inevitable that this tax will be targeted again.”
Currently, gifts made more than seven years before death are usually exempt from inheritance tax. Those made between three and seven years before death are taxed on a sliding scale, with the rate rising the closer the gift is to death.
Reports indicate the Treasury is reviewing these provisions and considering changes to the Residence Nil Rate Band, which was originally intended to shield family homes from IHT.
“The belief that inheritance tax only affects the ultra-wealthy is no longer accurate,” explains the deVere CEO.
“Rising property prices, frozen thresholds, and the steady erosion of reliefs mean many middle-income households – particularly in areas with high property values – are now caught. Any tightening of the rules will extend this to thousands more.”
Labour’s ‘Stability Rule’ requires all day-to-day government spending to be funded from tax revenues by 2030.
“It is politically simpler to change the structure of inheritance tax than to touch headline rates,” says Nigel Green.
“But such changes can have a profound impact on people who have worked for decades to build up assets to pass on. The consequences will be significant.”
The £325,000 nil-rate band has been frozen since 2009, gradually pulling more estates into scope as asset values rise. This fiscal drag has been a consistent driver of higher IHT receipts, and any direct changes to allowances or reliefs would intensify the trend.
“For years, frozen thresholds have quietly increased inheritance tax receipts,” he comments
“Now there is the real possibility of more overt interventions – such as lowering allowances, restricting reliefs, or revising long-standing gifting rules.”
Although Reeves has pledged not to raise taxes on “working people,” her Treasury deputy has defined the term as “anyone that gets a payslip.” This broad definition gives the government scope to argue that tightening inheritance tax does not breach the commitment, even if it impacts households well below the highest wealth brackets.
“Inheritance tax is one of the most politically useful levers available to any government looking to raise significant sums without touching headline tax rates,” concludes Nigel Green.
“Its scope is widening, and it is likely to be relied upon more heavily in the future.”
