Reeves weighs IHT reform with lifetime gift cap and taper relief

Chancellor Rachel Reeves is considering changes to inheritance tax that would tighten how much wealth can be passed on without tax, including the possibility of a lifetime cap on gifts and a review of taper relief. The discussions, said to be under consideration for the Autumn Budget, come as the government seeks ways to address a substantial fiscal gap while keeping other tax increases off the table. Officials have warned that any changes would need to balance revenue needs with potential impacts on family wealth transfer, economic growth, and public support for the government’s broader agenda.

Under current rules, inheritance tax is charged at 40% on estates above the nil-rate band of 325,000, with an additional 175,000 allowance for passing a main home to direct descendants, granting a combined potential tax-free threshold of up to about 1 million for couples. Yet a freeze on these thresholds has meant more estates enter the tax net as property values rise. In addition, gifts can be made without tax within certain limits: a 3,000 annual gift allowance, 250 small gifts, and specific exemptions such as marriage gifts, plus a regime known as taper relief for gifts made several...