Autumn Budget: Income Tax and Inheritance Tax subject to ‘stealth tax’
Income Tax will remain at current levels until 2028, with inheritance tax thresholds staying the same until 2030, Chancellor Rachel Reeves has announced in the Autumn Budget.
Reeves said:
“There will be no extension of the freeze in income tax and National Insurance thresholds beyond the decisions of the previous government.
“From 2028-29, personal tax thresholds will be uprated in line with inflation once again.”
She added:
“Only 6% of estates will pay inheritance tax this year.
“I understand the strongly held desire to pass down savings to children and grandchildren.
“So I am taking a balanced approach in my package today.
“First, the previous government froze inheritance tax thresholds until 2028. I will extend that freeze for a further two years, until 2030.”
Income Tax:
The income tax threshold freeze was described as a “stealth tax” by James Dickens, managing director of Wavensmere Homes, who said it would “bring in £7bn in additional ‘stealth tax’ revenue”.
However, there were fears that the freeze could be extended past 2028, so it could have been worse.
Sarah Coles, head of personal finance, Hargreaves Lansdown, said:
“Rachel Reeves has quashed one of the biggest fears people had about the Budget, by announcing there will be no additional freeze in the income tax thresholds.
“It means from 2028/29 they’ll be uprated with inflation.
“It will bring an end to the rapid escalation of people paying more tax at higher rates.
“Of course, we still have to get through several years of a freeze, but there’s some hope now the end is in sight.”
Inheritance Tax:
Inheritance Tax is set to be left alone until 2030, which is charged at 40% on the value of estates worth over £325,000.
The threshold hasn’t been altered since 2009, and it means that far more estates are affected as the years go by owing to rising inflation.
Inheritance Tax is charged on estates over £500,000 when an estate is passed to direct descendants, and at £1 million when passed to a surviving spouse or civil partner.
Rachel Reeves did change agricultural property relief (APR) and business property relief (BPR) however. From April 2026, the first £1million of combined business and agricultural assets will continue to attract no inheritance tax, but above that it will apply with a 50% relief. Inherited pensions will also be brought into inheritance tax from April 2027.
David Hutchinson, land & planning director of Boyer, said:
“While the change to Inheritance Tax (specifically in relation to agricultural relief) is unwelcome news for many landowning families, it may have the result of releasing of more agricultural land into the market.
“Should this occur on a large scale, the competition for greenfield sites may reduce, mitigating the increased costs of development and providing some benefit to developers in an otherwise difficult market.”
Kindly shared by Property Wire