What the changes to IHT reliefs mean for UK residents and non-doms

When a UK chancellor announces changes to tax relief in a Budget speech, it does not usually generate big headlines. Nor does it create a lasting impression in the minds of voters. (Source: FT Adviser)

In her first Autumn Budget last October, Chancellor Rachel Reeves introduced controversial reforms to the UK’s inheritance tax (IHT) system—particularly regarding reliefs and exemptions—that have left a lasting impact on both public discourse and media coverage.

The primary motivation behind these changes is to generate additional revenue for the Treasury. In 2023-24, UK IHT receipts reached a record £7.5 billion, marking a £400 million increase from the previous year’s record of £7.1 billion.

By closing perceived IHT loopholes, this figure is expected to rise significantly over the course of this parliament. However, there may be a silver lining for those most affected: placing a life insurance policy in trust could help reduce the tax burden on intended beneficiaries.

The IHT relief changes apply to UK residents and domiciled individuals, as well as non-domiciled individuals, with the most significant adjustment relating to asset relief.

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