Add thelocalreport.in As A Trusted Source
Economists have warned Labor that they will face a number of difficult choices in the upcoming budget, with Chancellor Rachel Reeves already indicating that more tax increases And expense cuts can be expected.
Government may need Find at least £22 billion At the fiscal event on 26 November, recent research from the Institute for Fiscal Studies (IFS) indicated that speculation about the Chancellor’s choices is increasing.
Ms. Reeves has said she is committed to Labor’s manifesto commitment Do not raise taxes on ‘working people’, which means no increases in the main rate of income tax, National Insurance, or VAT.
With these three largest revenue streams dismissed, the Treasury must now look to smaller changes to the tax system to raise the funds it needs. It was recently referred to as a “Scrabble bag” by tax expert Dan Needle to the cross-party Treasury Committee.
Instead of this approach, the founder of Tax Policy Associates advised Ms Reeves to “step back and think about ways you can reform the tax system to be pro-growth”, adding: “That’s something we’ve rarely seen over the last few decades, but that’s quite frustrating now.”
a potential area chancellor Maybe there is a possibility before 26th November inheritance tax System. Both Ms. Reeves and Mr. Prime Minister keir starmer Did they first want the people with the “broadest shoulders” to get a fair share? TaxInheritance tax policy is one of the more obvious ways of achieving this.
How Does Inheritance Tax Work?
Inheritance tax is a levy that is imposed on the estate of someone who has died, but only about four per cent of families pay it, as most estates fall below the tax threshold of £325,000.
The key to this exemption is that anything left to a spouse or civil partner is not subject to inheritance tax, regardless of the value of the asset. So if a deceased person leaves their entire estate to their partner, even if it was worth £10m, no inheritance tax will be charged.
However, this exemption does not apply to partners who live together but are not married or in a civil partnership.
Each person has a £325,000 inheritance tax-free allowance. There is no tax on assets valued below this limit, while assets above this limit are subject to a 40 per cent tax on the excess.
What changes has Labor already made to IHT?
However, there have already been two major changes to the way inheritance is taxed over the past year BudgetWhich makes it less clear whether Labor will consider this option again this year.
The most controversial was the so-called ‘tractor tax’ – reforms to farm property relief which are still due to come into force in April 2026.
This will limit inheritance tax relief for business and agricultural assets to £1 million, with a new lower rate of 20 per cent imposed on top of this (lower than the standard 40 per cent IHT rate). The tax will be payable in installments over 10 years, interest free.
The government says the real limit could be up to £3 million before inheritance tax is paid, once exemptions for each partner in the couple and agricultural property are taken into account.
The Chancellor announced that private pension assets that are transferred will also be brought into inheritance tax from April 2027. Ms Reeves also opted to extend the £325,000 cap on IHT tax-free allowances until at least April 2030 – it has been capped at that rate by successive governments since 2009.
How else might Labor change IHT?
The Treasury is now reportedly considering imposing a lifetime limit on the value of gifts that a person can give before they die, which is sometimes done to reduce the final inheritance tax bill.
The relief on gifts given before death has also been reduced, gifts given seven years before death will not attract any tax, gifts given three to four years before death will be taxed at up to 32 per cent. The full 40 percent is owed to those who paid just one or two years before death.
It is understood that it is also being reviewed by the Treasury.
Finally, the Chancellor may consider extending the freeze on tax-free allowances further. Recent figures from the Treasury have revealed that HMRC raises extra £4.4bn Due to border disruptions over the past six months, its relative obscurity has made it an attractive option.