Reeves leaves door open to IHT hike with business relief under threat

30th July 2024

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Alex Sebastian

Chancellor Rachel Reeves left the door open to inheritance tax (IHT) hikes as she announced the Budget will be delivered on 30 October.

According to Toby Tallon, tax partner at Evelyn Partners, Labour has been ‘fairly quiet’ on IHT, which means it is squarely in the frame for changes.

“The only official statement in Labour’s manifesto about IHT is that it will end the use of offshore trusts to avoid IHT,” he said. “The proposed changes for non-doms and to offshore trusts are significant and may well require a substantial rewrite of the IHT legislation.

“While other IHT changes are not confirmed nor ruled out, updating the legislation to reflect these proposals may provide Labour with an opportunity for further and more sweeping inheritance tax reform.”

Tallon noted that in November, the then shadow, now actual, environment secretary Steve Reed said that Labour had no intention of changing agricultural property relief.

“There has been no equivalent promise on business relief (BPR), and this is considered to be a likely target, though it may be more likely to be reformed rather than completely abolished,” Tallon said.

AJ Bell personal finance director Laura Suter added: “Often cited as the UK’s most hated tax, despite only being paid by a small proportion of the population, the Chancellor could set her sights on raising money through IHT.

“At 40% it’s already one of the highest tax rates, so it’s unlikely we’d see a headline rate increase. What’s more likely if Ms Reeves did want to change this tax is cutting allowances or whittling away certain reliefs to increase the amount some estates pay.

“A couple leaving their main residence to their children could potentially shelter a £1m estate from IHT, thanks to both the nil-rate band and the residence-nil-rate band – but either of these could be cut,” Suter continued. “Another option is taking a red pen to the reliefs given to businesses or to gifting rules – although these aren’t overly generous anyway.”