Prime Minister Andy Burnham has for the first time addressed inheritance tax (IHT) reforms since taking office last month, ruling out a 10 per cent levy on all estates. However, the wedding gift allowance remains frozen at £5,000 since 1975, a figure that would now be worth just over £40,000 if it had kept pace with inflation, leaving families potentially £35,000 worse off.
No Plans for 10% Death Tax
Speaking after his appointment, Mr Burnham previously supported replacing the current inheritance tax – a 40 per cent charge on estates above £325,000 – with a flat 10 per cent levy on all estates. But a government spokesperson clarified: “There are no plans for this. Fixing our social care system will require building a broad consensus. The old way of doing politics has held up social care reform for decades.”
The spokesperson added: “Our immediate focus is on working together to find common ground and deliver the reforms needed to fix the future of social care - not imposing one particular solution or tax.”
Wedding Gift Allowance Stuck in 1975
Under current rules, parents can gift a child getting married up to £5,000 without incurring an inheritance tax charge. This threshold has not been updated since 1975. If it had risen in line with inflation, it would now be worth just over £40,000 – a difference of £35,000.
Grandparents of the bride or groom can also gift up to £2,500 inheritance tax free, while for anyone else the limit is £1,000. These figures would be worth £20,000 and £8,000 respectively today if they had increased with inflation.
No Imminent IHT Changes
There remain no imminent IHT changes under Mr Burnham, apart from implementing the pensions changes from former Chancellor Rachel Reeves, which will bring pensions into IHT scope from April 2027.
Jon Stride, chair of the ATT’s Technical Steering Group, said: “Golden anniversaries are normally a cause for celebration, but not when it comes to this frozen allowance.”
He added: “Parents, grandparents and friends want to give their loved ones the best start in married life, but the failure to uprate this allowance in the last 50 years means fairly modest wedding gifts could incur inheritance tax bills. Alongside other gifting allowances, they’re in dire need of reassessment to ensure they are still fair and relevant in the 21st century. The OTS previously called for reform to the wedding gift allowance and we would also like to see the threshold raised. This would reduce complexity and allow HMRC to focus its resources on more significant inheritance tax issues, rather than relatively insignificant family gifts. Wedding gifts are traditionally something old, something new, something borrowed and something blue. This old threshold is certainly leaving some newlyweds feeling blue.”
The frozen allowance means many families face unexpected tax bills on wedding gifts, but no changes are expected in the near term as the government focuses on broader social care reform.
