UK households told of £16k HMRC allowance as Reeves told to scrap tax | Personal Finance | Finance
Rachel Reeves reforms Britain’s tax system (Image: Getty)
Britons could benefit from a £16,000 cut against the hated tax, an expert has said. HMRC data showed inheritance tax (IHT) receipts between May 2025 and April 2026 rose to £8.4bn, up from £8.3bn the previous year. Research from asset management firm Saltus It found that pensioners view IHT as the “most unfair” tax in Britain and want it to be scrapped altogether.
He added that while high net worth individuals (HNWIs) said IHT should be halved, only 18% said the current threshold was fair. The company highlighted “little-known” IHT exemptions, including the £16,000 wedding gift allowance and the unlimited “regular income” rule, as it aims to help families “transfer their wealth more efficiently”.
Alex Pugh, chartered financial planner at Saltus, said: “Our report shows that the majority of high net worth individuals view the inheritance tax system as unfair, but there is a clear gap between this perception and action, with many not taking full advantage of the discounts and exemptions available to them.
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Britons voice their opposition to inheritance tax (Image: Getty)
“In practice, clients tend to know the basics like annual gifting and charitable exemptions, but there is a broader range of often underutilized allowances and planning strategies that many people are unaware of.”
Ms Pugh added: “Many families are surprised at how much can be given tax-free when these grants are combined. “At a time when wedding costs are rising, this can be a simple and effective way to provide meaningful financial support without creating undesirable tax consequences.
“Our data shows that parents who donated money for a wedding over the last five years donated an average of 5,600, suggesting that the total wedding allowance remains a relatively underutilized benefit.”
Current rules mean parents can gift up to £5,000 to a child who marries or enters into a civil partnership, while grandparents can donate up to £2,500 and £1,000 to any other person; these are all exempt from IHT.
Combined with the standard annual exemption of £3,000 per person, this means that two sets of parents of a couple can jointly donate up to £16,000 towards a wedding in a single tax year without triggering any IHT liability.
This total can be increased further if unused annual exemptions are carried over from the previous year.
In its last Budget, the Treasury said: “The Government asks everyone to contribute to promoting economic stability and protecting public services.” The main rates of income tax, national insurance contributions (NICs) and VAT would not be increased, but income tax thresholds and equivalent NIC thresholds for employees and the self-employed would remain at their current levels for a further three years, from April 2028 to April 2031.
As with IHT thresholds for another year until April 2031.
The document added that ministers “will seek to introduce legislation to prevent inheritance tax avoidance through certain loopholes, including ensuring that UK agricultural properties held by entities outside the UK are treated as UK status, addressing changes to the status of trust assets and the exit charge, and limiting charitable exemptions to direct donations to UK charities and clubs.”
Ms Pugh said: “Making gifts from your regular surplus income is an excellent and highly effective way to reduce your inheritance tax liability.
“Unlike standard lifetime gifts, which require you to survive for seven years to be fully tax-free, qualified gifts derived from income are immediately removed from your estate.
“Also, there is no threshold as long as the person giving the gift can maintain their standard of living without having to withdraw capital from elsewhere.
“Our data shows that the average gift amount for rent or mortgage among high-net-worth individuals is 630 per month, suggesting that many could gift more if they had a better understanding of the excess income rule.”
