Inheritance Tax detail 'tucked away' in Budget could be 'very serious'

An inheritance tax warning has been issued as a ‘tucked away’ detail could have ‘very serious’ consequences. Rachel Reeves has announced in her Autumn Budget statement that pensions passed on will be subject to inheritance tax (IHT) from 2027.

Lord Craig Mackinlay has highlighted a "serious" consequence of Labour's changes after Labour Party Chancellor Ms Reeves confirmed that the freeze on tax thresholds until 2028 will be "extended for a further two years" until 2030.

Mackinlay explained: "On Inheritance Tax - tucked away in there is the real seriousness in my view. So you built up a business, you are now allowed to leave £1million value of business tax free to your heirs and successors - anything above that now will bear tax at 20 per cent.

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"So you imagine you've got a high value business with no cash - where are you going to find this 20 per cent IHT from? Are you going to have to close up this business? Break it up?" Mackinlay told GB News: "It's pure wordsmithing to say that that doesn't break the manifesto pledge.

"An employer has a certain budget for staffing, and now they've got to pay an increased amount of employer's National insurance - this is a savage rise. Not only the 13.8 per cent up to 15, but reducing the threshold down to £5,000 from just over £9,000. What that means is if you've got an employee on £9,000, the employer has got to find £600 more just to keep that employee going."

Daniel McAfee, a legal expert at and Head of Legal Operations at Lawhive has offered insights into removing the inheritance tax exemption for pensions. Additionally, he has expired the revenue that will be generated by the reform, as well as the challenges HMRC might face in implementing the changes.