Following the government’s Budget on 30 October 2024, the Treasury has signalled further potential changes to the UK’s inheritance tax (IHT) regime, ostensibly to address a widening public deficit.
Fiscal responsibility is crucial, but is there a risk that these proposals will undermine long-established principles of fairness, legal certainty, and economic stability?
In this briefing, partner James Cook argues that inheritance tax reform should complement, not contradict, long-term wealth planning.
Key measures on the horizon
In addition to the already announced scaling back of agricultural and business reliefs from April 2026 and bringing pension assets into the IHT net from April 2027, potential reforms may now focus on tightening or abolishing the seven-year gifting rule and limiting lifetime exemptions. These changes, while framed as targeting wealth and not every day working income, would significantly impact ordinary families, business owners and farming communities, many of whom have structured their affairs lawfully under the existing rules.
Risks to stability and trust
Clients have long relied on predictable tax rules, especially those governing lifetime gifts and pensions, to make informed and responsible decisions. Rapid changes not only erode trust and good faith in the legal system and the government, but also expose estates to significant tax liabilities they could not have reasonably foreseen.
Whilst appreciating the fiscal demands imposed on the Chancellor Rachel Reeves, it is worth considering the potential reforms in the context of her stated aim of delivering sustained economic growth. Reeves has emphasised productivity, business investment, and support for entrepreneurship as central to Britain’s economic recovery.
Existing and potential future IHT reforms are likely to disincentivise long-term family planning, penalise succession of family-run businesses, and destabilise rural economies. Removing key IHT reliefs from farms and small enterprises could lead to the forced sale of land or company shares simply to meet tax obligations—disrupting continuity, investment, and employment in vital sectors of the economy.
Similarly, extending IHT to pensions after decades of encouraging tax-efficient saving risks disincentivising prudent retirement planning, reducing financial resilience, and undermining trust in government-backed savings schemes.
The need for consistency
Growth strategies require policy stability and public confidence. A tax regime that penalises generational planning and small-scale wealth creation does little to foster entrepreneurship or long-term investment. At the moment, existing and potential future IHT reforms appear counterproductive in terms of meeting Chancellor's growth strategy. Tax reform should complement, not contradict, any government’s vision.
Our private client team is monitoring developments closely. If you’re concerned about how these changes may affect your estate planning or business succession strategy, please contact us for tailored advice.
About James
James advises on estate and succession planning, wills, probate, trusts, tax-planning, lasting powers of attorney, enduring powers of attorney and Court of Protection matters. His work often includes international elements whereby he advises both UK and non-UK clients.
Get in touch
If you would like to speak with a member of the team you can contact our private client solicitors; Holborn office +44 (0)20 3826 7522; Kingston office +44 (0)20 3826 7529 or Putney office +44 (0)20 3826 7515 or complete our form.
