Chancellor Rachel Reeves has confirmed a significant extension to the inheritance tax (IHT) freeze, a move that will see the taxman pursue tens of thousands more families over their estates in the coming years.
The Soaring IHT Burden: Key Figures
According to projections from the Office for Budget Responsibility (OBR), the policy will have a profound impact. The share of estates liable for the 40% death duty is forecast to rise from around 5% today to 9.3% by the 2030-31 tax year. This effectively means the number of families paying IHT will double over the decade.
The OBR's stark figures predict that 63,100 estates will be hit by IHT in 2030-31, a dramatic increase from approximately 32,200 this year. The extended freeze, now set to remain until 2031, is projected to raise a record £14.5 billion for the Treasury.
Political and Expert Reaction
The announcement has sparked immediate criticism from the opposition and warnings from financial experts. Richard Fuller, the Tory shadow chief secretary to the Treasury, accused the government of a stealth tax raid.
"Not content with hammering working people, Labour are now coming for those who have worked hard and saved right at the end of their lives," Fuller stated. "Reeves is clearly out of her depth."
Wealth management professionals echoed concerns about the tax's expanding reach. Rachael Griffin of Quilter noted that IHT is one of Britain's most detested taxes.
"What was once a tax on only the wealthiest families will increasingly impact those with even relatively modest estates," she explained. "After a decade of frozen thresholds alongside rising house prices, many more will be snagged by the tax."
Urgent Calls for Financial Planning
Financial advisers are urging families to take proactive steps to mitigate the growing IHT liability. Ian Dyall of Evelyn Partners described the announcement as a warning shot.
"Wednesday’s update means another year when protection against inheritance tax will shrink in real terms," Dyall warned. "That should act as a warning shot for all families facing growing inheritance tax liabilities to take steps now."
Michelle Holgate, financial planning director at RBC Brewin Dolphin, highlighted a common oversight in estate planning. She pointed out that nearly three-quarters of wealthy individuals have never made a financial gift during their lifetime.
"Too many people wait until death before passing on their assets when it can be far more tax-efficient to gift money while alive," Holgate advised. "You also get the bonus of seeing loved ones benefit."
With the freeze now locked in until 2031 and significant changes due in April 2027, the government is poised to collect revenue from an ever-widening pool of taxpayers, transforming IHT from a levy on the very wealthy to one affecting middle Britain.
