The UK Treasury is considering reforms to inheritance tax (IHT) as part of efforts to address a projected budget deficit exceeding £40 billion. Chancellor Rachel Reeves is exploring options to increase revenue from IHT, including tightening rules on lifetime gifting and potentially introducing a cap on the value of assets that can be gifted tax-free prior to death.
Potential changes to inheritance tax rules
Officials are examining whether tightening rules around the gifting of assets and money could help address the UK’s multi-billion-pound fiscal shortfall. Among the reported inheritance tax measures under consideration is a potential cap on lifetime gifts, part of a broader review into how assets can be transferred before death to minimise inheritance tax liabilities. The government is also reviewing capital gains tax (CGT) adjustments and previous changes to business property and agricultural tax reliefs. The broader aim is to increase revenue without deterring investment or prompting wealthy individuals to leave the UK.
Capital gains tax reform under consideration
In addition to inheritance tax reforms, the Treasury is reportedly considering changes to capital gains tax (CGT) as part of efforts to raise additional revenue. The Chancellor has ruled out raising VAT, income tax rates, or National Insurance rates, but this has added speculation on whether other taxes will be increased. Last year, Ms Reeves told the BBC that she had no plans to increase capital gains tax. However, since the Labour party came into office, she has claimed that there is a £22 billion shortfall in public finances this year. She has identified some savings, but it seems likely that the gap will also be plugged by raising taxes somewhere.
Public response and political implications
The potential reforms to inheritance tax and capital gains tax have sparked public concern and political debate. Proponents of stricter tax measures argue that the wealthy should contribute more to public finances, while critics warn that such changes could discourage investment and lead to capital flight. The government faces mounting pressure to balance revenue generation with economic growth and investment.
REFH – Newshub, 13 August 2025
