UK Chancellor Reeves Considers Tightening Inheritance Tax Amid Fiscal Challenges

Chancellor Rachel Reeves faces mounting pressure to address a significant shortfall in public finances, with economists predicting tax rises in the tens of billions of pounds this autumn to close the gap between government spending and revenue. Despite pledging not to alter fiscal rules that prevent borrowing for day-to-day expenses and mandate debt reduction, experts warn that any rule changes could trigger a market reaction similar to the 2022 mini-budget crisis under Liz Truss, increasing borrowing costs and potentially requiring further tax hikes. Reeves is reportedly considering tightening inheritance tax regulations, including imposing a lifetime cap on gifts and adjusting taper rates, aiming to boost revenues amid slowing economic growth, rising inflation, and high unemployment. These moves come as inheritance tax receipts have already reached record levels and thresholds remain frozen, but they face opposition from Conservative figures who argue such measures would unfairly penalize savers. While some analyses suggest the fiscal deficit may be smaller than initially feared, Reeves is still confronted with an 'impossible trilemma' of balancing tax increases, spending cuts, and market confidence. The government's adherence to fiscal discipline and the potential consequences of any policy shifts remain central concerns in the lead-up to the autumn budget.