Families who are grieving face waking up to £34,000 bills after rule change

UK households face waking up to £34,000 bills under the Labour Party government thanks to an inheritance tax raid. The government has published its Budget documents in the wake of the Labour Party Chancellor Rachel Reeves' Budget on Wednesday.

In the docs, it states: "Most estates will continue to have no Inheritance Tax liability following these changes. The government estimates that, out of around 213,000 estates with inheritable pension wealth in 2027 to 2028, 10,500 estates – or around 1.5% of total UK deaths - will become liable to pay Inheritance Tax where this would not previously have been the case."

Pensions will be subject to Inheritance Tax (IHT) from April 2027 – though the vast majority of estates will still not pay it despite the changes. The measures mean that an estimated extra 10,000 estates will be liable for IHT in the 2027-28 tax year, while an estimated 40,000 estates will be liable for more IHT as a result.

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The documents state: "Around 38,500 estates will pay more Inheritance Tax than would previously have been the case. This group are forecast to have an existing average Inheritance Tax liability of £169,000, increasing by around £34,000 on average when pension assets are included in the value of the estate."

In addition, the Chancellor has announced that the £325,000 threshold will now be frozen until April 2030. Previously the threshold was frozen until 2028. The documents add: "These figures do not take into account potential behavioural changes following the announcement of these measures, such as individuals drawing down pension funds at a faster rate and/or making greater use of other exemptions or reliefs to reduce their estate’s overall Inheritance Tax liability, but are provided for illustrative purposes."

The measures, announced as part of the Budget on Wednesday 30 October, mean that an estimated extra 10,000 estates will be liable for IHT in the 2027-28 tax year, while an estimated 40,000 estates will be liable for more IHT as a result.