An inheritance tax rise looms as the Treasury scrambles to fill a £50bn fiscal black hole. Reports suggest Labour may scrap the seven year gifting rule, sparking fears of a stealth wealth tax. Currently, estates over £325,000 face a 40% tax. Gifts given seven years before death escape charges, but this could change. Officials are also reviewing lifetime caps on tax-free donations, triggering backlash from wealthier households.
The seven year rule lets families avoid inheritance tax if gifts are made early. However, Treasury insiders argue closing this loophole could generate billions. Critics counter that middle class families, not just the rich, would suffer. Chancellor Rachel Reeves faces mounting pressure to find new revenue streams. With slow growth and using costs high, tax hikes seem inevitable despite earlier promises.
Many see inheritance tax as a wealth tax in disguise. Last year’s move to tax agricultural properties caused outrage, and further reforms risk fresh backlash. Analysts warn voters may revolt if thresholds aren’t adjusted for inflation. Former shadow chancellor Anneliese Dodds recently pushed for a broader wealth tax. Meanwhile, Angela Rayner’s leaked memo proposed eight new levies on the super rich, signaling internal Labour debates on fairness.
The National Institute of Economic and Social Research (NIESR) predicts a £41.2bn downfall by 2030. To stabilize finances, Reeves must find £51bn—likely through taxes, not just spending cuts. Business leaders urge caution, arguing higher taxes could stifle growth. Yet with public services straining, the Treasury insists reforms are unavoidable.
An inheritance tax rise looms, but the political fallout remains uncertain. Will Labour risk alienating homeowners and farmers? Or will they soften reforms to avoid electoral damage? As autumn budget approaches, all eyes are on Reeves. One thing is clear: tough fiscal choices lie ahead, and an inheritance tax rise looms at the heart of the debate.
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