One thing in life that can never be stopped is change, as it is the only constant in life. UK citizens had to face several changes since the beginning of 2025, and that includes the start of the new tax year. Now, some may have to say goodbye to sending their family money soon, as a certain British politician has set her sights on the HMRC’s most popular ‘tax exemption.’ Find out today what it entails and how it could potentially affect you and your family in the (hopefully not-so-near) future.
Tax in the UK is undergoing changes
The start of the new tax year included the start of several new tax changes for numerous employers, as well as taxpayers. Ellen Milner, CIOT Director of Public Policy, stated that:
“Some of this week’s changes are simply tax rises to raise revenue for public spending – the employer national insurance increase, for example. Others, such as the revised tax treatment of non-doms and those who let holiday homes, whilst also aimed at raising revenue, are significant structural reforms. Then there are the alterations to tax administration, such as additional reporting requirements for sole traders and company directors, which are largely about improving compliance.”
Now, Chancellor Rachel Reeves from the Labour Party Government has set her sights on what some may call the most popular tax exemption of His Majesty’s Revenue and Customs (HMRC). Find out how the potential change could impact you and your family.
This is the most popular HRMC ‘tax exemption’
Chancellor Reeves has already introduced a significant change to Inheritance Tax (IHT); however, she plans to take it another step further. Typically, IHT is 40% taxable, unless you provide your family with gifts of surplus income, and not savings, in which case it will be exempt. The gifts must also form part of a person’s regular expenditures, as per a report by Glasgow Live.
According to the HRMC, the following can be considered gifts:
- A house, land, or buildings
- Household and personal goods, for example, furniture, jewellery, or antiques
- Money
- Stocks and shares listed on the London Stock Exchange
- Unlisted shares you held for less than two years before your death
“Currently, if you make regular gifts there’s no restriction on how much you can give away immediately free from IHT, provided it is out of your income and doesn’t impact your normal standard of living.” – Sean McCann, a chartered financial planner at NFU Mutual
You may have to say goodbye to giving your family money
All of these gifts have their own particular limitations. For example, spousal gifts have a limited exemption for spouses who have resided in the UK for less than 10 tax years. According to a report by BirminghamLive, gift donors must also sustain themselves financially to maintain a typical living standard. Now, it can all change soon.
According to McCann, this provision “is likely to be in the chancellor’s sights in the forthcoming budget.”
Chancellor Reeves is considering changing the gift exemption rule, which would then prevent individuals from gifting unlimited wealth to family members without incurring tax. What’s more, families may soon need this £82 document, which will be harder to get as of November.
Unfortunately, change is inevitable. While some believe that these changes are for the greater good in the long run, the impact they could have on Britons in the near future may not be so positive as some may want to believe. Whether the changes will also impact the gifts you give to charities or political parties is still unclear. All we can do now is wait. For more information about the family gifting provision, please visit the UK Government website to view the UK Government’s official statement.
Disclaimer: This article is for informational purposes only and does not constitute tax advice. It does not replace HMRC’s guidance or official notices. To confirm your eligibility or payment status, click the HMRC‑linked resources in our article or log in to your HMRC online account; for personalised advice, consult a qualified tax professional.
