Chancellor Rachel Reeves’s reported plans to target wealth and assets in next month’s Budget will hit homeowners hard, according to David Alexander, chief executive of DJ Alexander.
The Scotland-based estate agent said ongoing speculation about the November Budget continues to suggest potential tax increases on property, with proposals expected to include major changes to inheritance tax (IHT).
Government sources have indicated that the chancellor is focusing on so-called “unearned wealth” as part of efforts to plug an estimated £50bn gap in the public finances.
Inheritance tax is currently charged at 40% on assets above the £325,000 threshold, with an additional £175,000 allowance for a main residence passed to a direct descendant.
Under existing rules, unlimited gifts to friends or family remain exempt from IHT, provided they are made at least seven years before death.
Latest HMRC figures show a record £8.2bn was raised in IHT during the 2024–25 tax year, and receipts are forecast to climb to nearly £14bn by 2030. The surge is being driven by the frozen tax thresholds, with the £325,000 nil-rate band unchanged since 2009 — a level which would now stand at £523,130 if it had tracked inflation.
Public opposition to inheritance tax appears to be rising. A YouGov poll of 2,200 people found 54% of respondents believe the levy should be abolished altogether — up from 49% last year — as more families than ever are drawn into paying it.
Wealth managers also report a sharp increase in clients transferring assets early amid concerns the government may extend the exemption period to 10 years or remove certain reliefs in an effort to boost Treasury revenues.
Equity release advisers said they had seen a rise in enquiries from over-55s following changes to IHT announced in last year’s Budget. There was a 10pc year-on-year increase in the total unlocked from homes in the second quarter of 2025, according to the Equity Release Council, who said the trend was mainly driven by new borrowers taking £126,422 on average from their properties.
Alexander explained: “There is a view that IHT is something that only impacts upon the very wealthiest in society. We are told that this tax only hits those with “the broadest shoulders” and that most people should not worry as it will only affect a small sector of society. The truth is that it increasingly impacts on more and more ordinary homeowners who have simply seen the value of their property increase over the last three decades. To state that someone who has paid a mortgage and saved all their life and accumulated assets worth over £325,000 in now rich is clearly not a realistic definition of wealthy.”
“Indeed, it won’t be the wealthiest who will be most affected but mostly those who have benefitted from rising house prices over the last two decades. The richest in society have accountants and advisers who are able to severely reduce their liability while the most affected will be those with smaller estates who will be drawn into paying this tax.”
He continued: “The assumption by the chancellor is that homeowners will simply sit back and let this happen to them. The reality is that any change will generate huge behavioural changes which will reduce the amount any increase in IHT will bring. There is already evidence that this is happening as people have increased the size of gifts given to relatives prior to the Budget and more are withdrawing value from their homes through equity release. There is, in fact, a stronger argument for reducing the rate, removing some of the exemptions and anomalies in the system which could actually result in higher returns for the Treasury.”
“These tax changes target ordinary British people. It’s people who are working very hard, building up a pension, and paying off their mortgage. These are people who are doing everything that the system is telling them to do and yet they are now to be penalised for doing the right thing.”
Alexander added: “It can’t be right that this specific group – who have saved, bought a home, and paid into a pension – should be seen as an easy target for increased taxation. This is counter intuitive in any society where the encouragement of thrift, effort, saving, and work is being punished rather than rewarded and these individuals were simply hoping that their lifelong efforts would result in them being able to provide a nest egg for their families.”
Read the orginal article: https://propertyindustryeye.com/targeting-inheritance-tax-will-hit-homeowners-hard/
