Wealthy Britons are rushing to gift money to family members amid growing fears that Labour's Rachel Reeves could tighten inheritance tax rules.
Tax advisers report an increase in people asking how to reduce death duties and gift money ahead of any possible changes in the spring Budget.
Wealth managers say clients are accelerating their plans to transfer assets to relatives under the current regime, which allows tax-free gifts if the donor survives for seven years.
The rush comes as experts warn the seven-year rule itself could be targeted for reform.
Under current rules, gifts made to family members are completely free from inheritance tax if the donor lives for seven years after making them. However, if the donor dies within three years, the gift is taxed at 40 per cent.
For gifts made between three and seven years before death, a sliding scale known as taper relief applies.
Taper relief only applies if the total value of gifts given in the seven years is more than the £325,000 tax-free limit
GETTYWhat is the 7-Year Rule?
Taper relief only applies if the total value of gifts given in the seven years is more than the £325,000 tax-free limit. For example:
- If someone survives three years after giving the gift, the tax rate drops from 40 per cent to 32 per cent.
- After four years, it drops from 32 per cent to 24 per cent.
- After five or six years, it drops to 16 per cent.
- After six to seven years, the tax rate is only eight per cent.
Nimesh Shah, chief executive of accountancy firm Blick Rothenberg warned: "The seven year rule is now up for grabs, that seems to be the next target.
"You could widen it to 10 years. Inheritance tax is now at the fore of concerns."
Olly Cheng, financial planning director at Rathbones said: "There is a feeling among a lot of people that there will need to be more tax increases to balance the books, and the consequence of this uncertainty is that people are bringing forward gifts that might have been made later."
He explained there has been increased anxiety among clients about future tax changes following the measures that were announced in the October Budget.
The rush to gift assets has been particularly driven by upcoming changes to pension and agricultural land taxation.
From April 2027, unused pension pots will be included in estates and face the standard 40 per cent inheritance tax rate.
Landowners will also be subject to a new 20 per cent levy on agricultural land above thresholds of between £1.3mn and £3mn from April 2026.
Emma Sterland, chief financial planning director at Evelyn Partners, says the reforms have led to more "clients thinking about making financial gifts to their families".
Ian Cook, a chartered financial planner at Quilter Cheviot, reports encouraging clients to "consider gifting more strategically" ahead of the pension changes.
The Government collected £6.3bn in inheritance tax between April and December 2024, as more estates fall within its scope. Despite this revenue, inheritance tax accounts for less than one per cent of total government income.
Reeves' options for raising additional funds appear limited, having pledged during last year's general election not to increase rates of income tax, national insurance or VAT.
While she recently indicated a softening stance on tax reforms for wealthy non-doms, tax experts say this will "have no impact on the direction of IHT".
