Will the Chancellor target inheritance tax in the autumn budget?

With the new Labour government’s autumn budget approaching on 30 October 2024, there has been speculation that the Chancellor, Rachel Reeves, may include changes to the inheritance tax rules.  

The government is expected to raise some taxes to address what the Chancellor has called a ‘£22 billion black hole’ in public finances.  

While the Labour manifesto pledged there would be no tax increases for working people, Rachel Reeves has not ruled out changes to inheritance tax. 

But according to a recent YouGov poll, commissioned by the law firm Kingsley Napley, there is strong opposition to any increase in the current 40% rate of inheritance tax, with 69% of those polled saying they would disagree with this measure.  

In addition, 64% of respondents wanted to see an increase in the individual inheritance tax threshold of £325,000, which has been frozen despite house price increases. 

Although the tax is notoriously unpopular, fewer than five percent of estates were liable in 2021/2. The ability to pass thresholds between spouses, and further allowances when passing property to children, reduces the number of people who need to pay. 

According to James Ward, partner at Kingsley Napley, which commissioned the research: “Although an increase in VAT or income tax would do far more to help plug the ‘black hole’, [the Chancellor’s] manifesto has prevented her going down that route, so curbing exemptions around inheritance tax is one of the few options open to her.” 

He added: that while increasing inheritance tax remains unpopular. The chancellor: “could potentially justify changes that target wealth passing between generations on fairness grounds.” 

Read more about this story on the Property Wire and This is Money websites.