Will Inheritance Tax Be Abolished? What UK Families Should Know About the Future of IHT

Belgravia Capital
May 31
3 min read

With every Budget announcement and general election cycle, speculation resurfaces around a controversial question:

“Will inheritance tax be abolished?”

At Belgravia Capital Wealth Management, we understand why families are asking.

Inheritance Tax (IHT) is deeply unpopular - and for good reason. Yet despite decades of political promises, IHT remains firmly in place.

In this article, we explore the current landscape, assess whether IHT is likely to be abolished or reformed, and most importantly - explain what proactive planning UK families should do now, regardless of future political headlines.

Why Is Inheritance Tax So Controversial?

IHT has been criticised for being:

A double tax - on wealth that’s already been taxed as income or capital gains
A complex system, difficult for families to navigate
A tax that disproportionately affects the “asset-rich but cash-poor”
A voluntary tax - with many wealthier individuals able to avoid or mitigate it through planning

Despite affecting only around 4–5% of estates, its political weight is far greater, due to emotional and generational concerns.

Current Inheritance Tax Rules (as of 2025)

40% tax rate on estates over the tax-free allowance
£325,000 nil-rate band per person
£175,000 residence nil-rate band if passing the main home to direct descendants
Up to £1 million tax-free for married couples or civil partners
Transfers to spouses or charities are exempt

Estates over these thresholds can face large IHT bills - often funded through asset sales.

Calls for IHT Reform or Abolition: What’s Been Proposed?

Several politicians, think tanks, and newspapers have called for radical reform. Proposals have included:

Total Abolition of IHT

Backed by some Conservative MPs and certain right-leaning think tanks.
Arguments: simplifies the tax system, supports family wealth, avoids asset sales.
Challenge: IHT raised £7.5 billion in 2023–24 — scrapping it would leave a gap in Treasury revenue.

A Flat Lifetime Receipts Tax

Suggested by the Institute for Public Policy Research (IPPR) and others.
Tax individuals on what they receive across their lifetime, rather than estates on death.
Viewed as more progressive and harder to avoid.

Lower IHT Rate, Fewer Loopholes

Reduce the 40% rate but scrap many reliefs and exemptions.
Keeps revenue steady while simplifying the system.

Removing the Residence Nil-Rate Band

A Labour Party policy idea, aimed at simplifying the system and removing perceived bias toward homeowners.

What Are the Political Parties Saying About IHT?

Conservative Party

Some MPs favour abolition or reform
2023 and 2024 Budget speculation included IHT cuts or removal - but no change implemented
May revisit it ahead of the next election

Labour Party

Historically supports closing IHT “loopholes” (like Business Relief or Trust planning)
Less likely to scrap IHT; more likely to tighten rules or reduce allowances

Liberal Democrats / Green Party

Support more progressive wealth taxation, including IHT reform - not abolition

Bottom line: No major party currently in power has formally committed to abolishing IHT.

Will Inheritance Tax Be Abolished Any Time Soon?

Unlikely - and certainly not without replacement.

It generates billions for the Treasury
Any cuts or abolition would need to be funded from elsewhere (e.g. VAT, income tax)
Abolition could be viewed as benefiting the wealthiest at a time of cost-of-living concerns

Reform is far more likely than full abolition.

Expect possible changes in:

Reliefs (e.g. Business Property Relief, Agricultural Relief)
Trust taxation
Thresholds being frozen for longer (already frozen until 2028)

Should You Delay Planning in Case IHT Is Abolished?

Absolutely not. Hoping for abolition is not a strategy.

Here’s why:

IHT may increase, not decrease, under a different government
Future planning options may be more limited if rules are tightened
The longer you wait, the fewer lifetime gifting strategies are available (e.g. 7-year rule)
Changes are unlikely to be retrospective - planning now secures your position under current rules

What Smart Families Are Doing to Save on Inheritance Tax

Regardless of future reform, high-net-worth individuals are:

Making lifetime gifts within the 7-year window
Setting up trusts for generational wealth transfers
Equalising estates between spouses
Investing in IHT-efficient assets
Taking out life insurance policies in trust to fund future liabilities
Working with advisors to ensure no allowances go unused

How Belgravia Capital Wealth Management Can Help with IHT Planning

We help families future-proof their estates, regardless of political changes. Our services include:

IHT exposure analysis
Trust and gift planning
Insurance structuring
Liaison with solicitors and accountants
Strategic planning across generations

We take an evidence-based approach - no guesswork, no waiting on government promises.

Conclusion: Will Inheritance Tax Be Abolished?

It’s highly unlikely in the short term.

While the debate continues, UK families need to act within the rules that exist today. The good news is: those rules still offer many opportunities to reduce or avoid IHT - but only if you plan ahead.

Don’t leave your legacy in the hands of political uncertainty.