Budget 2025: Rumours of Inheritance Tax Changes
A flurry of rumours has surfaced about potentially radical changes to the taxation of Lifetime Gifts for Inheritance Tax purposes. As the Government looks at ways to increase tax revenue at the next Budget to fill the deepening financial ‘black hole’ that is emerging.
This isn’t an unexpected turn of events. All of the noise coming from policy-makers is that a Wealth Tax will be ruled out due to the limit on the amount of money that would actually be generated from its introduction. The reform to existing wealth taxes like Inheritance Tax would seem to be on the cards as an option.
To be put Inheritance Tax into context with taxes like Income Tax and Corporation Tax, it doesn’t generate a huge amount of money, but changes could potentially generate some money. However, its unlikely to be the single silver bullet which can solve the Treasury’s financial ‘black hole’. However, Inheritance Tax is of huge importance and interest to those in later life in the community and we do have to expect at the very least, that IHT will be looked at and maybe some changes to be announced in November.
The suggestions doing the rounds currently are:
A limitation on Lifetime Transfers: with the potential for a Lifetime or Annual Cap on Lifetime Giving (currently there is no limit on lump sum outright gifts)
An extension of the Survival period: perhaps to 10, 14 or even 20 years (as you may know, the current survival period for a gift to be outside your estate is 7 years)
Taper Relief: a harshening of the taper relief rules where Inheritance Tax is reduced after 3 to 4 years of surviving a lifetime gift
The financial planning impact for those in later life of these potential changes could be:
Life insurance policies set up in trust could become even more popular; providing the right money at the right time to pay off any Inheritance Tax liability
A move to make larger gifts earlier (if families have to wait much longer than the current 7 years to bring any gifts fully outside the estate)
A greater attractiveness for Business Property Relief qualifying investments; where such investments can be made ensuring 0% IHT after just 2 years
We should also note that any changes to the lifetime gifting regime will bring about an increase in record-keeping and reporting – meaning more cost and complexity (currently there is no need to report outright lifetime gifts at the point of gifting as there is not tax to declare)
What does all this mean for later life financial planning? Over the next few months in the lead up to the Budget on 26th November we will be providing insightful commentary and advice for those in later life. This can be best accessed reviewing our regular blog articles and commentary on the Harold Stephens website and social media channels. Head over to ‘Harold Stephens IFA’ on You Tube and subscribe to the channel to get the very latest videos direct from Richard Higgs, later life financial planning specialist.
Finally, register and reserve your place at one of our 2 post-budget Later Life Financial Planning live events to be held on Wednesday December 3rd 2025 by emailing office@haroldstephens.co.uk.