You don't have to own a castle to be caught up in the UK's Inheritance Tax grab!
In today's breaking news (13/08/2025) ..... The Treasury Mulls Lifetime Gifting Cap in Inheritance Tax Overhaul
Inheritance tax (IHT) could be in the government’s sights this autumn, with reports suggesting that the Treasury is exploring new restrictions on how much wealth can be passed on tax-free during a person’s lifetime.
According to The Guardian, officials are modelling how much extra revenue could be raised by tightening the rules on gifts of money and assets — part of Labour’s wider effort to close a £40 billion gap between public spending and revenue.
What’s on the table?
One proposal under review is a cap on lifetime gifting.
Currently:
Gifts made more than seven years before death are completely exempt from IHT.
Gifts made between three and seven years before death are taxed at a reduced rate via taper relief, starting at 32% and dropping to 8% the closer you get to seven years.
A lifetime cap could set a maximum value of tax-free gifts that an individual can give, no matter how far in advance they’re made. The taper relief rules themselves may also be tightened — potentially increasing the IHT bill for estates where large gifts were made within that seven-year window.
Why is this being considered?
With rising property prices, frozen IHT thresholds, and more wealth held in appreciating assets, the government sees gifting rules as an area where the wealthy could contribute more. But ministers are wary of loopholes that could undermine the policy.
While IHT only affected 4.6% of deaths in 2022–23, the number of estates paying the 40% levy is climbing.
The current nil-rate band has been stuck at £325,000 for over a decade, so inflation and asset growth are quietly pulling more families into the net.
Expert views
Sarah Coles, head of personal finance at Hargreaves Lansdown, notes that limiting “potentially exempt transfers” — gifts that escape IHT if the donor survives seven years — could be attractive to the government because they generally involve surplus cash or investments, not the family home.
However, any reform to taper relief could create what she calls a “cliff edge” — meaning someone who gifts money in good faith but dies just short of the seven-year mark could face a significantly higher tax charge, reducing what their heirs receive.
What this means for your planning
If you’re considering lifetime gifts as part of your estate plan, this review is a reminder that rules can change. Locking in gifts sooner rather than later could help you secure current benefits — but only if it fits with your overall financial situation.
Chancellor Rachel Reeves has promised not to raise income tax, VAT or National Insurance, so changes to IHT may be one of the few levers available to boost revenues this year. All eyes will be on the autumn Budget for clarity.
Your next steps...
Make the time to stop and list all of your assets and liabilities.
Speak with a tax adviser / family tax accountant and work with them to calculate the IHT which - had you died yesterday - your family / Estate would have to pay today.
Implement the appropriate strategies to mitigate the IHT tax bill.
Get quotes for whole-of-life life insurance which should be properly arranged to pay the IHT bill (rather than having to deplete savings and investments, or having to sell the home and other properties / assets to find the money).
For an introduction to a tax adviser, and for whole-of-life life insurance quotes, contact the Assured Protect advisers here.
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