Budget Expected to Target Homeowners with Inheritance Tax Changes
Chancellor Rachel Reeves is expected to target property and wealth in this month’s Budget, a move that experts say will disproportionately impact homeowners as concerns rise over potential changes to inheritance tax (IHT).
David Alexander, chief executive of DJ Alexander, Scotland’s largest estate and letting agency, reports growing alarm among families who fear being drawn into a tax system historically intended for the very wealthy. Government sources have confirmed that “unearned wealth” is a key focus as the Treasury seeks to address a £50 billion gap in public finances. Currently, IHT stands at 40% on estates exceeding £325,000, with an additional allowance of £175,000 for a main residence passed to direct descendants; however, these thresholds have remained frozen since 2009, leading to more estates becoming liable for the tax.
Record figures from HMRC show grieving families paid £8.2 billion in inheritance tax last year, with forecasts predicting this could rise to £14 billion by the end of the decade. Despite this, a recent YouGov poll revealed that 54% of respondents support abolishing IHT altogether. Wealth managers are seeing increased numbers of clients proactively transferring assets, and equity release withdrawals rose 10% in the second quarter of 2025, reaching an average of £126,422, according to the Equity Release Council. This trend suggests homeowners are already taking steps to mitigate potential tax liabilities.
“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,” Alexander stated. “To state that someone who has paid a mortgage and saved all their life and accumulated assets worth over £325,000 is now rich is clearly not a realistic definition of wealthy.” He warned that any tightening of the rules could lead to behavioral changes, such as increased gifting and equity release, ultimately reducing the expected revenue gains. Changes to IHT could have a significant impact on the housing market and family finances, potentially influencing spending and investment decisions. For more information on estate planning, see the government’s official guidance.
Officials have indicated that the Chancellor believes homeowners will accept these changes, but Alexander predicts resistance and further preemptive action from property owners.
