The government is once again rumoured to be eyeing the assets of those who have worked hard all their lives—this time by tightening inheritance tax (IHT) rules. According to reports in the Times today, Treasury officials are exploring measures that could make it harder for people to pass on wealth to their children without a significant slice being taken by the state.
While a formal wealth tax appears to be off the table, Chancellor Rachel Reeves has not ruled out changes to IHT. Proposals said to be under consideration include:
- A lifetime cap on the amount that can be gifted free of IHT.
- Harsher tapering rules that amend the seven-year window for gifts before death to become tax-free.
- Closing “loopholes” that currently allow asset transfers during one’s lifetime to escape tax entirely.
The Treasury is under pressure to plug budget shortfalls, with tens of billions in extra funding reportedly needed to meet spending commitments. Officials may see IHT reform as politically easier than touching income tax, national insurance, or VAT—three levers Reeves has promised to leave untouched.
Warm Hands, Cold Hands—Same Outcome
Traditionally, the tax system has drawn a sharp distinction between gifts made during life (“warm hands”) and inheritances after death (“cold hands”). Under current rules, giving away assets more than seven years before death can avoid IHT altogether. If the proposed changes go ahead, that distinction could all but vanish.
Whether you pass on your home, investments, or family business early or leave them in your will, the taxman may soon be waiting at the same door. For families, this could fundamentally alter long-term financial planning, impacting decisions on housing, business succession, and even charitable giving.
A Shift in the Social Contract?
Inheritance tax already brings in record sums—£6.7 billion in 2022–23—and receipts are set to rise further as frozen thresholds quietly pull more estates into the net. For many, the issue isn’t just about tax efficiency—it’s about trust. People who played by the rules, saved diligently, and hoped to give their children a better start may now see those plans undermined by retrospective or near-retrospective changes.
If the rumours are correct, the government is asking the same group—middle and upper-middle-income households who have already paid income tax, capital gains tax, and stamp duty throughout their lives—to “help the kids again,” not directly, but via the Treasury’s coffers.
Planning Ahead
If you have legacy assets, now is the time to review your plans. Speak to a holistic planner who can help you understand the potential impact of reforms, consider alternative strategies, and protect your intentions—whether those involve family, philanthropy, or community legacy.
In times like these, financial planning is not just about numbers; it’s about ensuring your life’s work serves the people and purposes you care about most, rather than disappearing into the black hole of budget deficits.
Take Control of Your Future—With Expert Support, On Your Terms
Life changes can be challenging—career shifts, family transitions, financial uncertainty. You don’t have to navigate them alone. As your Financial Life Coach, we work with you—not for commission, not to sell products, but to give you clear, tailored guidance you can trust.
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- Create a financial plan that reflects your values and goals
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Book your first session today and start planning for the life you want—on your terms.
Steve Conley, Financial Life Coach. email: steve.conley@aolp.co.uk
Academy of Life Planning 
Update: The Times 14/08/25.
The latest inheritance tax rumours have sparked warnings from across the political and economic spectrum. Critics argue that capping lifetime gifts or tightening the seven-year rule could make the UK less attractive to wealthy residents, drive out non-doms, and hit middle-income families making modest transfers—such as helping children with house deposits.
Tax experts caution that the policy may not raise the revenue the Treasury hopes for, as most gifts fall below £20,000 and data on gifting is scarce. Opponents, including Kemi Badenoch and Richard Tice, frame the proposals as an attack on savings, pensions, homes, and family legacies, while the Institute for Fiscal Studies warns that meaningful revenue gains would require taxing much smaller gifts, impacting “ordinary” households as well as the wealthy.
The core tension remains: how to close the fiscal gap without undermining aspiration, mobility, and trust in long-term financial planning.