Experts say there could be various changes to the thresholds
Speculation is mounting ahead of the Spring Statement this week as experts hint at potential tweaks to inheritance tax allowances. Chancellor Rachel Reeves will appear before Parliament on Wednesday (March 26) to set out her latest financial policies, and experts are predicting there could be shifts in several tax-free limits.
Pointing to possible changes, Fiona Peake, personal finance expert at Ocean Finance, said: “If the Chancellor does tweak inheritance tax, it’s likely to be focused on lifting the nil-rate band or adjusting rules around gifts.”
Under current thresholds, individuals can pass on up to £325,000 worth of assets without paying inheritance tax, plus an additional £175,000 if they are passing on their main home to a direct descendant.
Spouses or civil partners can inherit any untouched allowances. Melissa Henderson, a chartered financial planner at BRI Wealth Management, also suggested there could be changes to the tax-free allowances.
She said: “There could potentially be changes to lifetime gifts – a cap on the number of lifetime gifts or perhaps an increase in the annual gifting allowances per individual.”
You can currently give away up to £3,000 annually divided among any number tax-free. Additionally, you can give away any number of gifts up to £250 to different people, provided you have not used your other reliefs on the same individual. You can also potentially avoid inheritance tax when giving away a larger sum, but you must live for another seven years for it to be exempt.
You can also give away regular gifts for birthdays or Christmas from your usual income tax-free. Other allowances to note include you can give money for weddings or civil partnerships, including up to £5,000 to a child, £2,500 to a grandchild or great-grandchild, or £1,000 to anyone else.
Ms Peake warned there is “a lot of uncertainty” surrounding inheritance tax, especially after the Government’s announcement last year that pensions will be subject to inheritance tax from April 2027. She explained: “At the moment, pension pots can be passed on tax-free if the saver dies before 75, but with the proposed changes, beneficiaries could be hit with a tax bill.
“The Spring Statement could clarify how this will work, including thresholds and exemptions. Without clear guidance, people may rethink how they save for retirement.”
Ms Henderson emphasised the need for “urgent clarity” on the new pension rules, such as whether the tax would be taken from the pension itself. She said: “There has been talk around a flat rate of inheritance tax applied to pensions so that the administration can be quickly completed on death.
“This would enable beneficiaries, such as the surviving spouse to access the funds if needed for living costs. The executors would then apply to make an adjustment to account for this tax already paid when submitting the IHT 400 form to HMRC.”
In contrast, other experts think there are unlikely to be major tax changes set out this week. Tom Shave, president of Europe and Asia-Pacific division at Ryan, said: “Given the number of changes the Chancellor made in the Autumn Statement at the end of 2024, we’re not expecting a huge number of tax-specific announcements from the upcoming statement.
“It will likely be more of an economic update focused on spending cuts rather than tax changes. The key question is: what are the unintended consequences of changes made six months ago and whether additional support is needed for businesses navigating ongoing economic pressures.”
Mr Shave called for a “clearer roadmap” both on the Government’s tax policies and to foster business growth and investment within the UK. He explained: “With mounting pressure on UK businesses, from rising costs to international trade uncertainty, many are finding it increasingly difficult to manage costs and the uncertain business environment.
“Meaningful action is needed to ease the burden of taxation on businesses along with more growth-associated measures.”
