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According to the Stealth tax news, Chancellor Rachel Reeves is making changes to the UK’s taxes, mainly by altering inheritance tax and pension policies. From April 2027, extra taxes will be added to unspent pensions in people’s wills, making more than £3 billion in annual tax revenue by 2040s evaluators.
For now, inheritance taxes stay at £325,000 until 2030, which means more people will need to pay, and this is causing more problems for retirees and savers. It’s posing a tough problem, although the main interest rate increases aren’t attracting much attention.
How inheritance tax allowances are quietly being eroded
As property prices continue to rise, more estates will be taxed on the inheritance tax threshold because Rachel Reeves has set it at £325,000 until 2030. April 2027 will see unused pension pots included when calculating inheritance tax, so you cannot avoid tax by putting savings into them.
According to Stealth tax news, From April 2026, the £1 million relief cap will apply to business and agricultural properties, with the extra amount getting relief at only half the previous rate. Stocks not present on national exchanges will see less tax relief when it comes to estates and pensions.
Why pensions are suddenly under tax scrutiny
Stealth tax news mentions that officials are proposing to set the maximum pension lump sum at £100,000, which could happen, and start offering a flat-rate pension tax relief of around 30% in place of the present system that depends on the person’s income tax band. Many experts predict that these changes may result in savings numbering in the billions every year and, according to the Fabian Society, people in pensions could see at least £10 billion more in their income, so this is a major hidden tax affecting pensions.
What this means for retirees and savers right now
When it comes to Stealth tax news, UK retirees who have a lot of wealth are reworking their plans by spending more and giving away assets before the inheritance tax is modified in April 2027. As an example, Jim Everard, age 64, boosted his pension spending so that he could enjoy luxury trips and buy a new electric vehicle. According to him, without tax breaks, he decides to spend his money on fun.
At the same time, Lak Sidhu, age 59, has removed his children’s financial burden by taking care of their student loans and helping to organize taxable investments. He says, after seeing the budget, “It has forced us to reconsider what we want to do with our pensions.” The decisions they have taken prove that some retirees have found creative ways to handle their money following the new tax regulations.
How it affects your estate planning and gifting tactics
IHT rules at present mean gifts you give within seven years of your death may be taxed, but the rate is gradually reduced until the deadline. Meanwhile, the Office for Tax Simplification has proposed to reduce the exemption period to five years and to get rid of taper relief in Stealth tax news.
As a result, people who give gifts at this time might face a bigger tax bill immediately. Some people are calling for the gifting period to last ten years, which might make more gifts get taxed.
Why Reeves chose stealth taxes instead of raising headline rates
According to Stealth tax news, if elected, Rachel Reeves will not boost income tax, NI, or VAT, so she can ensure that workers are protected from tax rises. Still, because both income and inheritance tax thresholds are frozen until certain dates, this results in a higher tax rate for people due to the process called “fiscal drag”.
Stealth tax news mentions that with this system, Reeves avoids breaking her pledge while bringing in more income to deal with economic issues. It is argued by many that middle-income people suffer more from these stealth taxes, but Reeves states that again, this way is necessary for the government’s budget and to support public expenditure.
What’s coming up in the Spending Review and Budget timelines
The Summer Review is scheduled for June 11, 2025, and on April 6, 2027, the changes to inheritance tax are due to be enacted. Stealth tax news mentions that it is expected that the Summer Review will specify how the government intends to divide around £600 billion, mainly on infrastructure and services for the public over the next few years. Tax rises including adjustments to pension and fuel taxes might be revealed in the Autumn Budget of 2025.
Because unused pension funds and death benefits will be included in inheritance tax starting in April 2027, this may result in greater taxes being paid by estates with a lot of pension savings.
She manages to squeeze more money out of the system by making small shifts instead of trying harsh tax rises. Thanks to this method, fairness and proper handling of money are maintained while changing many people’s financial situations.
