Rachel Reeves has directly dismissed speculation that Labour would scrap the inheritance tax seven-year rule, stating she has “no plans to make changes”.
The Chancellor’s statement comes amid growing concerns from tax advisers that the gifting allowance could be targeted in her upcoming Spring Statement.
Speaking to GB News, Reeves emphasised her focus remains on tackling the cost of living crisis, reiterating her commitment not to increase taxes on “working people, their income tax, their national insurance or their VAT”.
Despite Reeves’ assurance, wealthy Britons have been rushing to transfer assets to family members amid fears of potential changes to the inheritance tax rules.
Rachel Reeves ruled out changes to the seven-year rule
GB NEWS
Tax advisers report increased enquiries about reducing death duties and gifting money ahead of the Spring Budget.
“There is a feeling among a lot of people that there will need to be more tax increases to balance the books,” said Olly Cheng, financial planning director at Rathbones.
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Rachel Reeves joined Stephen Dixon and Ellie Costello on GB News
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Some experts warn the seven-year rule could be extended to 10 years or face complete abolition.
Under current rules, gifts made to family members are completely free from inheritance tax if the donor survives for seven years after making them.
If the donor dies within three years, the gift faces a 40 per cent tax rate.
A sliding scale known as taper relief applies for gifts made between three and seven years before death.
Rachel Reeves set out a series of tax measures in her October Budget
PA
The tax rate drops to 32 per cent after three years, 24 per cent after four years, and continues decreasing to 16 per cent after five years.
After six to seven years, the rate falls to just eight per cent.
Nimesh Shah, chief executive of Blick Rothenberg, warned: “The seven year rule is now up for grabs, that seems to be the next target.”
Ian Cook, financial adviser at Quilter Cheviot, echoed these concerns, describing the gifting rule as “under threat” in the Spring Statement.
“Switching from seven to 10 years is a very easy change to make. I wouldn’t be surprised if the Government announces a review of the process,” Cook added.
Emma Sterland of Evelyn Partners reports more “clients thinking about making financial gifts to their families”.
The Government collected £6.3bn in inheritance tax between April and December 2024, as more estates fall within its scope.
Despite this revenue stream, inheritance tax accounts for less than one per cent of total government income.
Reeves’ options for raising additional funds appear constrained, having pledged during last year’s general election not to increase rates of income tax, national insurance or VAT.
Recent changes already include bringing unused pension pots into the inheritance tax net from April 2027.
