Will Inheritance Tax Change? What UK Families Need to Know About the Future of IHT

Belgravia Capital
May 31
3 min read

With rising property prices, frozen tax thresholds, and growing political debate, more families are asking:

“Will inheritance tax change?”

It’s a fair question - and one that doesn’t have a simple answer.

Inheritance Tax (IHT) is one of the most politically sensitive and economically significant taxes in the UK.

While major reforms have been discussed for years, recent developments suggest that change is not only possible, but likely.

In this article, Belgravia Capital Wealth Management explains how IHT might change, what proposals have been floated, and what families should do now - regardless of what happens in Westminster.

Why Is Inheritance Tax Under Review?

IHT has long been criticised for being:

Complex and confusing
Easily avoided by the wealthy with access to advisors
Unfair to middle-income families with property-rich estates
A “voluntary tax” in the words of some, due to the number of reliefs and exemptions available

At the same time, IHT raised over £7.5 billion for HMRC in 2023–24 - a record high - as more estates were dragged above the frozen nil-rate bands.

With this growing revenue - and discontent - IHT is firmly back on the political and fiscal agenda.

How Inheritance Tax Works Today (2025)

40% tax rate above the tax-free allowances
£325,000 nil-rate band per individual
£175,000 residence nil-rate band (if passing the main residence to a child or grandchild)
Up to £1 million tax-free for married couples or civil partners
Lifetime gifts made more than 7 years before death are exempt
Certain assets (e.g. businesses, farms, AIM shares) may qualify for Business or Agricultural Relief

What Changes to IHT Have Been Proposed?

Over the past five years, a number of official reviews and political manifestos have put forward ideas to reform or replace IHT. These include:

Reducing the IHT Rate and Scrapping Reliefs

Lower the rate from 40% to 10–20%
Remove reliefs like Business Relief and Agricultural Relief
Simplify the system but broaden its application

Replacing IHT with a Lifetime Receipts Tax

Tax beneficiaries on what they receive over a lifetime (e.g. after £125,000)
Proposed by think tanks like the Resolution Foundation and IPPR
Potentially fairer and harder to avoid

Simplifying Gifts and Lifetime Transfers

Scrap the 7-year rule and taper relief
Introduce a simpler annual gifts allowance
Cap the amount anyone can receive tax-free in their lifetime

Freezing or Reducing Allowances

The nil-rate bands have already been frozen until at least 2028
Real value eroded by inflation
Reducing the thresholds or means-testing the residence nil-rate band has been suggested

Abolishing Inheritance Tax Entirely

Floated by some Conservative backbenchers
Popular with voters but unlikely without replacing lost revenue

Have Any Changes Already Been Made?

Not yet. Despite speculation during the 2023 and 2024 Budget seasons, no major IHT reform was announced.

The Conservative government instead:

Froze allowances until 2028
Increased HMRC compliance activity to close IHT avoidance

Under the current Labour government , changes could include:

Tighter rules on trusts and gifting
Scaling back or removing Business Relief

They have already brought pensions into IHT, and changed rules around relief for inherited land.

Is Inheritance Tax Likely to Change Soon?

Yes, but not necessarily in the way people expect.

Full abolition is politically difficult and financially costly
Reform and tightening of existing reliefs is far more likely
HMRC may focus on compliance and enforcement, especially on trusts, offshore assets, and gifting

Any major changes are likely to be announced in advance and not retrospective, which means planning now is still valuable.

What Should You Do About Inheritance Tax Right Now?

While speculation continues, the most prudent course is to plan using the current rules. These include:

Gifting assets early to trigger the 7-year rule
Equalising estates between spouses or civil partners
Using trusts to manage family wealth
Insuring against future liabilities with whole-of-life cover
Claiming Business Relief or Agricultural Relief where applicable
Ensuring your will is up to date

If the rules change later, plans can be adjusted. But if you do nothing now, you could miss out on existing reliefs.

How Belgravia Capital Wealth Management Can Help

We help high-net-worth families across the UK:

Understand and project their IHT exposure
Navigate current tax rules with confidence
Build flexible plans that can adapt to future legislation
Use trusts, gifting, and insurance to preserve wealth
Coordinate with legal and tax professionals for end-to-end planning

We don’t rely on guesswork - we prepare our clients for any scenario, with practical strategies that work today and tomorrow.

Conclusion: Will Inheritance Tax Change?

Yes - change is highly likely. Whether through rate adjustments, relief reforms, or new legislation entirely, IHT is firmly under the spotlight.

But instead of waiting and wondering, the most effective strategy is to take action now - while you still can.

Need expert help navigating inheritance tax and preparing for the future?