The Treasury is reportedly considering further changes to inheritance tax (IHT), which would potentially see a lifetime cap being imposed on the value of gifts an individual can make before death without incurring an IHT charge.

As reported by The Guardian, sources said the Treasury was looking at ways to raise more money through IHT by tightening rules on the gifting of money and assets to help address the gap between revenue and spending.

However, the publication noted that no decisions have been taken yet, and the Treasury is still assessing its options.

Currently, the ‘seven-year gifting rule’ means that gifts made seven years before an individual dies are not subject to IHT, while gifts made between three and seven years before death benefit from tapered relief.

The introduction of a lifetime cap would limit the value of money or assets someone can gift as part of their IHT planning without incurring a tax charge.

The Guardian also reported that the Treasury was reviewing rules around the taper rate.

Commenting on the rumours, Quilter tax and financial planning expert, Rachael Griffin, said the potential introduction of lifetime gifting cap would represent a fundamental change to the ways families pass on wealth.

“Such a cap would bring more gifts into scope for IHT and could capture not just large transfers designed to reduce tax bills but also modest, routine support between family members,” Griffin continued.

“Introducing a lifetime cap would be a significant departure from current policy. The UK has never had such a limit, and if it were set too low it could affect a large number of middle-class estates, particularly in areas where property wealth alone can easily breach frozen thresholds.

“Tracking a lifetime cap could prove administratively complex, requiring HMRC to hold long-term records of gifts across decades and potentially leading to disputes where records are incomplete.”

Griffin also warned of the risk of unintended behavioural shifts, as people may be encouraged to make larger gifts earlier in life to use up their allowance, potentially moving significant assets out of their control before they are financially ready.

“Others might explore more structured planning options, such as trusts, which can offer greater flexibility and control over how assets are managed and distributed,” she said.

“While these arrangements may involve professional advice, they can also provide long-term benefits, including safeguarding wealth for future generations and ensuring that gifts align with broader financial and family goals. However, whether these could be utilised would depend on how the rules are set out if changed.

“If a lifetime cap is introduced, it must be designed in a way that recognises the positive role intergenerational transfers play in supporting younger generations. Without careful thresholds and exemptions, a cap risks discouraging these transfers, limiting the flow of wealth through the economy, and unfairly penalising families who make regular small gifts over many years.”

Spencer West LLP partner, Hilesh Chavda, added: “Capping lifetime gifts could alter behaviour, potentially reducing overall tax revenue as individuals might retain assets in their estates, transferring them only upon death.

“This shift could significantly impact the economy and tax receipts. The effect of any cap on lifetime gifts largely depends on its design. A substantial cap, similar to the one in the US, might encourage long-term estate planning and facilitate the movement of assets.”

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