LONDON (Reuters) – British finance minister Rachel Reeves announced the inheritance tax threshold freeze would be extended until 2030 as she delivered her first budget plan on Wednesday.
Inheritance tax (IHT) is charged at 40% on the value of estates above 325,000 pounds ($423,000), a threshold which has not changed since 2009.
Reeves said that level would be extended to keep the first 325,000 pounds of any estate inherited tax-free.
That figures rises to 500,000 pounds if the estate includes a residence passed to direct descendants, and 1 million pounds when a tax-free allowance is passed to a surviving spouse or civil partner.
However, from April 2027, inherited pension pots would be subject to inheritance tax, Reeves said, and from April 2026 agricultural property relief and business property relief would be reformed.
The relief for farms and businesses would be limited to 1 million pounds, she said.
The reforms, which would affect the wealthiest 2,000 estates each year, are predicted to raise 2 billion pounds in total to support public services, according to Reeves.
Past governments have shied away from big reforms to IHT, which raises about 7.5 billion pounds per year and Reeves said only 6% of estates would pay tax this year.
($1 = 0.7680 pounds)
(Reporting by David Milliken and Sachin Ravikumar; Writing by Catarina Demony; Editing by Hugh Lawson)
