UK Government to Raise Inheritance Tax: What It Means for Families

The government is gearing up to increase UK inheritance tax, a move that could impact families across the country who are hoping to pass on their homes, savings, or businesses to loved ones. Inheritance tax is one of those issues that often feels distant—until it suddenly isn’t. With new changes expected in the Budget on 30th October, families may need to brace for higher bills when it comes to the assets they leave behind.

Right now, UK inheritance tax stands at 40% on anything above the £325,000 threshold. For many families, especially those with property in areas where house prices have soared, this limit is easy to exceed. Whether it’s a family home or lifelong savings, the thought of having a big chunk of it going to the taxman can feel frustrating—especially when that money was meant to support the next generation.

While the details of the changes are yet to be confirmed, it’s clear that the government is under pressure to find ways to raise more revenue. Rumours suggest that exemptions like Business Relief, which helps family-run businesses, and Agricultural Relief, which protects farmland, could be reviewed. Gifts given during a person’s lifetime may also face new scrutiny. Currently, if you give away more than £325,000 and die within seven years, your heirs could be liable for inheritance tax on those gifts. There’s talk that even these rules might tighten, leaving fewer ways to reduce the tax burden.

Why is the government making these changes? Well, the country is grappling with a significant financial shortfall—around £40 billion—which means tax increases are on the table to help balance the books. Ministers are emphasising the need for a financial reset, but many worry that it’s ordinary families, particularly those who have saved all their lives, who will bear the brunt of these changes.

For those planning their estates, now is the time to pay close attention to what’s coming. Understanding how the new rules may affect you and your loved ones will be crucial. And while the official announcements are still to come, it’s always worth seeking professional advice to ensure your plans are as tax-efficient as possible.

More detailed insights on UK inheritance tax planning, can be found reading this guide from MoneySavingExpert.

For more updates on UK financial policies and how they affect you, visit EyeOnLondon for ongoing coverage and expert insights.