Wealthy Britons will give more money in fear of inheritance tax

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Rich Britons are giving money to family members amid fears that Rachel Reeve could make the inheritance tax system more punitive, according to wealth managers.

Tax advisers told the Financial Times that they have seen an increase in endowments and inquiries about reduced death duties since October. BudgetWhen the chancellor plans to impose an inheritance tax on pensions and farmland.

Reeves last month The emergency spring budget was removed. But some analysts and advisers have warned that an inheritance tax could cast the net further to bolster the government’s budget plans.

The fear has prompted many people to give money under the current regime, which does not apply IHT at 40 per cent on gifts, unless the benefactor dies within seven years.

“The seven-year rule is now up for election, which seems to be the next target,” said Nimesh Shah, chief executive of accounting firm Blake Rothenberg. “You can increase it to 10 years. Inheritance tax is now at a critical level.

Ollie Cheung, director of financial planning at Rathbones, said after the wealth manager took action targeting pensions and farmers, “the government is seeing a lot of concern about where to target next”.

“There is a feeling among many people that more tax increases are needed to balance the books, and the result of this uncertainty is that people are bringing in gifts that can be made later,” he said.

The threat of a rise in IHT comes as the government’s tax receipts rise, with tax authority HM Revenue & Customs collecting £6.3bn between April and December 2024.

The government collects less than 1 per cent of its total revenue from the death tax, but Reeves’ pledge at last year’s general election not to raise income tax, national insurance or value added tax has left her with room to raise revenue.

Reeves’ proposal this week came after she warned that it was driving people to leave Britain to soften tax reforms for the non-wealthy. But Shah said the changes “will have no impact on the direction of IHT”.

Wealth managers say many more clients will face the prospect of their estates falling within the scope of IHT over the next decade, with some saying the rise in donations is linked to changes to HMRC’s handling of pensions and agricultural land.

Unused pension pots will be included in assets from April 2027 and will be subject to the standard 40 per cent IHT rate. Meanwhile, landlords will face a 20 per cent tax on farmland worth between £1.3mn and £3mn from April 2026, depending on the estate and owner.

Emma Sterland, managing director of financial planning at Evelyn Partners, said reforms to pensions and estate tax were driving “customers thinking about making a financial gift to their families” as the budget evidence showed IHT was “in the treasury”.

Ian Cook, chartered financial planner at Quitter Cheviot, said he was encouraging clients to “think about gifts more strategically” after many began “looking for ways to transfer wealth during their lifetime” in light of the upcoming pension tax reform.

The Treasury did not immediately respond to a request for comment.