The changes are set to be introduced in 2027
10:07, 26 Aug 2025Updated 17:21, 26 Aug 2025
Rachel Reeves
Tax changes could cost bereaved families tens of thousands of pounds. Chancellor Rachel Reeves is expected to be about to introduce changes to inheritance tax laws – which could cost the average homeowner £82,000.
Under the new rules, a working-age single homeowner in possession of an average-priced property in England (£290,395) and a pension pot of £415,000 would be hit with an inheritance tax bill of £82,158.
This follows Ms Reeves’ announcement that from April 2027, pension pots will no longer be exempt from inheritance tax, subjecting them to taxes of up to 40%. The change is expected to increase the number of estates paying death duties from 4% to 9.7%.
Ms Reeves is also considering plans to stop families from making unlimited tax-free gifts to their children under plans to tighten inheritance tax rules, reports Birmingham Live.
Jon Greer, head of retirement policy at Quilter, said: “A grieving family with young children and an average priced home could face six-figure IHT bills at the most distressing time.
“Married couples are protected by exemptions and allowances; cohabitees aren’t.”
He also noted that without a gradual introduction of the change, the policy risks inflicting a financial blow that could destabilise a family’s future despite raking in very little additional revenue.
Rachael Griffin, tax and financial planning expert at Quilter, added: “Such a cap would bring more gifts into scope for inheritance tax and could capture not just large transfers designed to reduce tax bills but also modest, routine support between family members.”
She added that Quilter’s research indicates retirees give about £2,500 annually to loved ones, often to assist with education and living expenses.
Meanwhile, she warned that without careful thresholds and exemptions it could unfairly penalise families who regularly make small gifts over many years.