The countdown is on to 30 October and the Budget, which could bring big changes to Inheritance Tax (IHT).  

With tax receipts hitting record highs, the Chancellor may have her eye on reform. 

In the first five months of 2024, the UK brought in £3.5 billion in IHT, £300 million more than the same time last year.  

This surge is driven by frozen tax thresholds. As property and asset values rise, more estates are pulled into the tax net.  

In the full 2024 financial year, a staggering £7.5 billion was raised.  

With figures like these, many are expecting IHT to be a key target in the Budget. 

Where does IHT stand today? 

Right now, IHT is charged at 40 per cent on estates worth more than £325,000.  

But what if the Chancellor raises the rate or lowers the threshold?  

This would mean more estates get taxed, leaving less for beneficiaries. 

What about exemptions? 

Exemptions soften the blow of IHT. Agricultural land and family businesses currently benefit, but if these exemptions are cut or removed, it could lead to larger tax bills.  

Families with ties to farms or small businesses may have to sell assets to cover these taxes. 

Will the seven-year gift rule change? 

Gifts made more than seven years before death are currently exempt. But if this period is shortened, more gifts could fall under IHT.  

This could increase the tax burden for those who passed assets to their families in recent years. 

Is the spousal exemption safe? 

At the moment, assets transferred between spouses or civil partners aren’t taxed.  

But this could change. If the exemption is reduced or removed, surviving spouses could face an IHT bill, adding financial pressure at an already difficult time. 

Will the nil-rate band stay the same? 

The nil-rate band, which is the threshold above which IHT kicks in, has been frozen at £325,000 for years.  

As inflation and asset prices rise, more estates are dragged into the tax.  

Freezing or lowering this threshold would mean more estates fall under IHT, and the tax bills grow. 

These are just possibilities, but they show how the Budget might shake up Inheritance Tax.  

As the Chancellor prepares to make his announcements, the chance of IHT reforms looks real.  

Keep an eye on developments as Budget Day draws near. 

If you’re concerned about how these changes might affect you, please contact us today.