Budget backlash intensifies over 'hated' inheritance tax

Chancellor Rachel Reeves has been warned that her plan to hike inheritance tax risks punishing middle-class homeowners as the backlash against her Budget intensified.

- HOWARD MUSTOE, KATE DEVLIN, MILLIE COOKE

Ms Reeves is considering an increase on the "death tax", which raises about £7bn for the Treasury each year, despite the fact it is routinely found to be one of voters' least favourite measures.

Senior Conservatives said the chancellor was forcing those who had saved all their lives to "pay the price", as criticism of her Budget mounts.

Shadow chancellor Jeremy Hunt accused Labour of planning the tax rises for months, without "the courage to admit it to the public during the election campaign". He added: "Unfortunately it looks like it will be people who have saved all their life to provide an inheritance to their family who will pay the price for Labour's tax rises."

The chancellor is also exploring the feasibility of freezing income tax thresholds beyond 2028, which could drag more people into paying higher rates of tax, according to reports. Income tax thresholds have been frozen since 2021. While they remain fixed, inflation on wages pushes more workers into paying higher rates of the levy. The freeze had been due to end in 2028, but Ms Reeves is thought to be preparing to extend it.

Meanwhile, Sir Iain Duncan Smith told The Independent the inheritance tax hike would "punish ordinary people who have worked hard".

Referencing the £325,000 cut-off for charging inheritance tax, the former Tory leader said: "We're not talking about 'zillionaires'. With house prices in southern England, you won't even get a flat for that money. A two-bed flat in London would be twice that price."