Copy article

Will Rachel Reeves’ IHT Raid Spark a Short-Term Spending Boom?

ended 02. August 2025

Chancellor Rachel Reeves’ proposed Inheritance Tax changes — dragging pensions, farms, and business assets into scope — may have an unintended consequence: a short-term economic boost, fuelled by a wave of early wealth transfers.

Faced with rising IHT risks and complex trust planning, many wealthy parents may now opt to transfer significant assets directly to their adult children. The logic? Better to give it now than lose 40% later.

And when the next generation inherits early, they tend to spend — not save.

We want your thoughts:

Are clients already adjusting their planning to beat the 2027 IHT deadline?

Could this “spend now” wealth transfer lift the economy short-term?

What are the risks of gifting too early?

 

7 responses from the Newspage community

Copy all

Star Quote
Copy

Editor
Scott Gallacher
Director at Rowley Turton
We’re definitely seeing IHT become a growing concern for our clients, with a noticeable rise in enquiries.

To a large extent, IHT is a voluntary tax — with careful planning, it can often be significantly reduced. But because some of the planning is complex and can be difficult to comprehend, many families are opting for the simpler route of gifting assets directly to their children. That can bring unintended consequences: parents may end up financially struggling, especially in their later years, while children risk developing a culture of dependency.

My golden rule is 10:1 — for every ten years mum and dad spent saving, the kids will blow it in one. Cars, holidays, extensions, kitchens, bigger houses, school fees — you name it.

If not careful, the parents risk the kids running around in brand new Range Rovers whilst they themselves struggle to afford to have the heating on. Good for the economy, and the Chancellor, but not the parents.
Copy

Editor
Justin Moy
Managing Director at EHF Mortgages
The proposed changes to IHT have certainly stoked a greater interest in Equity Release, to allow for earlier inheritance through the generations, and avoiding Tax if the Donor survives 7 years or longer. The higher interest rates for those Lifetime Mortgages are probably stifling significant amounts of that activity at the moment, but it will become an important tool to manage IHT provision in the years to come.
Copy

Editor
David Stirling
Independent Financial Adviser at Mint Wealth
Since the Chancellor's announcement of the tax changes to pensions, we have seen a significant increase in the the number of clients looking at IHT planning and many taking their 25% tax-free cash allowances. There has also been an increase in IHT planning using discounted gift trusts, that use taper relief over 7 years to reduce liability. This allows clients some control and potential income without fully gifting their cash now.
Copy

Editor
Samuel Mather-Holgate
Managing Director & IFA at Mather and Murray Financial
Without doubt, people have seen the tax bombshell coming thier way and are avoiding this by making early substancial gifts. This is being seen now, and will continue until such tax changes are reversed, that is probably inevitable. There are lots of client with money tied up that they cannot gift though; if your wealth is in your property of your pension it is difficult to gift this during your lifetime. There are more clients using clever planning to even gift these away during their liftime though; increasing pension drawdown amounts and passing wealth on through their income or even taking our equity release mortgages so children can benefit from the value of thier paretns homes now.
Copy

Editor
Riz Malik
Independent Financial Adviser at R3 Wealth
Those reviewing their inheritance tax positions may reasonably conclude that it is better to give with a warm hand than a cold one following the pension rate. This could result in an earlier transfer of wealth, helping the economy and the UK property market. The impact of future tax receipts will be great, but perhaps Rachel Reeves is banking on that being her successor’s headache.
Copy

Editor
Tony Redondo
Founder at Cosmos Currency Exchange
Rachel Reeves’ IHT changes, due to come in 2027, are prompting early wealth transfers. This could spark a short-term spending boom as younger recipients spend, boosting retail and real estate. Risks include financial insecurity for donors, IHT liability if they don’t survive seven years, and loss of asset control. The broader economic impact of Reeves’ IHT reforms appears overwhelmingly negative, with a £14.8 billion loss in Gross Value Added (GVA) and up to 200,000 job losses over five years due to reduced investment in family businesses and farms for the UK economy. These sectors, particularly for the agriculture, construction, and hospitality sectors, are facing 15-17% investment declines, which could easily offset any consumer spending boost from wealth transfers.
Copy

Colin Low
Managing Director at Kingsfleet
This is highly unlikely. Those who have liquid assets (rather than in property) could have already chosen to spend the funds by now. However, they are more likely to make gifts to families instead.
It is this generation that is likely to upsize their property, pay down a mortgage or add to their savings. There could be small leakage to consumer spending but it's unlikely to be a boom.