Wealthy families waking up to £20,000 bills in wake of Budget rule change

Wealthy families waking up to £20,000 bills in wake of Budget rule change

by · Birmingham Live

Wealthy families are waking up to £20,000 bills in the wake of the Labour Party Budget. Chancellor Rachel Reeves delivered her Autumn Statement and fiscal Budget on Wednesday, October 30, to much speculation - with inheritance tax among the rules being shaken up.

Firm Blick Rothenberg reported wealthy families have been doing some serious planning to reduce the inheritance tax (IHT) bill that the younger generation could face. If a family owns a house worth £800,000 as well as shares, then current rules mean the married couple can combine allowances to pass on up to £1m tax-free (including their home) to their offspring.

However, from 2027 their children can no longer inherit their £700,000 undrawn pension pot tax-free and will have to pay IHT on it. They may also own £100,000 of shares in smaller companies listed on the Aim junior market (current rules exempt Aim shares held for at least two years from IHT).

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From April 2026 Reeves has cut this relief to 50% – so they could be looking at a bill of £20,000. It comes after former Chancellor Ken Clareke went on to argue they “did not have leaks of any kind” when he was chancellor in the 1990s, adding: “Even the cabinet did not know what was going to be in the budget until the day before, because someone in the cabinet would have leaked it.”

The Tory peer argued that the Government now deliberately leaks policies to test them out with the public and Labour lobbies, and will even leak “nastier things” to lower the impact of the real policies. Lord Clarke said: “It is all deliberate media management nowadays and the old obligations to Parliament are, in practice, being completely, deliberately and openly abandoned.”

However, former head of the civil service Lord Butler of Brockwell said: “Trying to prevent governments in this day and age rolling the pitch before a major announcement is like King Cnut asking the tide to turn.”