Families across Britain could be facing unexpected inheritance tax bills running into thousands of pounds under new government proposals, financial experts are warning.
Chancellor Jeremy Hunt is reportedly considering significant changes to how inheritance tax is calculated, with concerns mounting that the reforms could create a 'stealth tax' affecting middle-class estates.
What's Changing in Inheritance Tax Rules?
The proposed overhaul would see the current system of calculating inheritance tax based on an individual's estate replaced with a new model focusing on beneficiaries. This fundamental shift in approach could have far-reaching consequences for families planning their financial futures.
Under the existing system, individuals can pass on up to £325,000 tax-free, with additional allowances for main residences. The new system being explored would calculate tax liability based on how much each beneficiary receives from an estate.
Why Experts Are Sounding the Alarm
Financial advisors and tax specialists have expressed serious concerns about the potential impact of these changes. Many fear that what's being presented as simplification could actually result in higher tax bills for ordinary families.
"This isn't just tinkering around the edges - it's a fundamental rewrite of how inheritance tax works," said one leading wealth management expert. "The danger is that families who've carefully planned their estates could suddenly find themselves with unexpected tax liabilities."
Who Would Be Most Affected?
The changes are particularly worrying for:
- Homeowners in areas with rising property values
- Families with multiple children or beneficiaries
- Those with modest savings and pension pots
- People who've already undertaken inheritance tax planning
Estate planning specialists warn that the proposed system could disproportionately affect families with assets primarily tied up in property, potentially forcing difficult decisions about family homes.
What Happens Next?
While the proposals are still under discussion within government circles, the timing suggests changes could be announced in the upcoming Autumn Statement. Families are being advised to review their estate planning arrangements and seek professional advice.
With inheritance tax already one of Britain's most controversial taxes, these proposed changes are likely to spark significant debate in Parliament and beyond as the details emerge.
