Rachel Reeves has announced that the inheritance tax personal allowance threshold will be extended until 2030.

She has also announced that inherited pensions will now be included in inheritance tax. Finally, she will reform agricultural and business relief from April 2026.


The changes to inheritance tax could raise billions as Reeves attempts to plug the £22bn black hole in the public’s finances.

Budget2024: Inheritance tax changes, rachel reeves

Budget2024: Inheritance tax changes: Prior to the announcement today, it was rumored that families would need to reassess their financial strategies

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Prior to the announcement today, it was rumored that families would need to reassess their financial strategies as Reeves considered extending gift-free periods and applying IHT to retirement pots.

Currently, gifts made seven years before death are IHT-free, with a sliding scale for those made between three and seven years prior, , however, reports suggested this could extend to ten years.

Tim Snaith from Winckworth Sherwood warned: “The chancellor could also limit or remove the tapering relief on the seven-year rule. This would increase IHT raised for the Government, but would create a huge cliff-edge system where if you fail to survive the full seven years by a few days your beneficiaries could potentially face IHT at the full 40 per cent.”

This change could significantly impact estate planning strategies, particularly for those in their seventies.

Currently, pensions are generally exempt from inheritance tax, offering a valuable estate planning tool. However, this could change as the wealthy individuals are using pensions as an IHT avoidance vehicle, the Institute for Fiscal Studies stated.

Applying IHT to defined contribution pensions could raise £200million this year, increasing to £400million by 2029. Such a change would have significant financial implications for beneficiaries.

For instance, an average pension pot of £85,000 for savers over 55 could face an IHT bill of £34,000, assuming the estate exceeds IHT allowances.

Savvy planners may consider nominating younger beneficiaries with lower income tax rates to inherit pensions after age 75, potentially preserving more of the fund’s value.

Currently, inherited assets benefit from a capital gains tax (CGT) uplift, resetting their value upon death, however, it was speculated that this could change.

Snaith said “There is talk that Labour may remove the CGT uplift rule where IHT is not chargeable on inherited assets, for example between married couples, which could mean a tax bill for a surviving spouse.”

Such a change would particularly affect couples with long-held assets.

HMRC logo outside the tax department building

The Budget 2024 was announced on October 30

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Following the change announced today, it’s crucial for Britons to stay informed and seek professional advice.

Families should review their estate plans regularly, considering the potential impact of these changes on their financial legacy.