Chancellor considers caps on lifetime gifting to plug budget black hole

It has been reported that the Chancellor, Rachel Reeves, is exploring further reforms to the inheritance tax (IHT) regime by introducing a lifetime cap on tax-free gifts and revising taper relief for gifts made between three and seven years before death.

Under existing rules, there is no cap on lifetime gifting.  Gifts made more than 7 years before death are not subject to IHT as they fall outside of the estate for IHT purposes.  Gifts made between three and seven years before death may qualify for taper relief meaning that the effective rate of tax ranges from 32% to 8%. 

There is a concern that a cap to limit the total value of tax-free gifts during a person’s lifetime could ‘fundamentally change’ how people pass on wealth from the modest inter-generational gifts to high-value transfers. 

Whilst the Treasury have yet to formalise any proposals this signals another potentially huge shift to IHT policy.  We can expect precise details in the Autumn Budget. 

If you would like to discuss lifetime gifting do get in touch and speak to one of our experienced members of the Private Client team. 

“Introducing a lifetime cap would be a significant departure from current policy. The UK has never had such a limit, and if it were set too low it could affect a large number of middle-class estates, particularly in areas where property wealth alone can easily breach frozen thresholds. Tracking a lifetime cap could prove administratively complex, requiring HMRC to hold long-term records of gifts across decades and potentially leading to disputes where records are incomplete.”

https://todayswillsandprobate.co.uk/chancellor-considers-caps-on-lifetime-gifting-to-plug-budget-black-hole/