Chancellor Rachel Reeves’s forthcoming Budget is expected to bring significant changes to how property and wealth are taxed, and experts are warning that homeowners could face the greatest impact. According to David Alexander, chief executive of DJ Alexander—the largest estate and letting agency in Scotland—ordinary families are growing increasingly anxious about potential reforms to inheritance tax (IHT), fearing they will be drawn into a system that was once meant only for the wealthy elite.
The government has been clear that “unearned wealth” is one of its main targets as the Treasury seeks to address a £50 billion shortfall in public finances. However, while this approach is presented as a move towards fairness, many industry professionals argue that it could inadvertently harm the very people who have worked hard to buy their homes and save responsibly throughout their lives.
At present, inheritance tax is charged at a rate of 40% on estates valued above £325,000. There is also a main residence allowance of £175,000 when a property is passed directly to children or grandchildren. These thresholds have remained frozen since 2009, despite a steady rise in property prices across the UK. This freeze means that as house values have climbed, more and more ordinary families have been pulled into the tax bracket.
Experts point out that if the thresholds had kept pace with inflation, the basic nil-rate band would now exceed £523,000. The failure to adjust these limits has led to what many describe as “tax by stealth”, as homeowners are paying more without any official tax rate increases. This situation has left many feeling unfairly penalised for simply owning property that has appreciated in value over time.
HMRC figures reveal that inheritance tax receipts hit a record £8.2 billion last year—a stark indicator of how the tax is affecting more families than ever before. Projections suggest that this figure could rise to £14 billion by the end of the decade, reflecting how deeply rising property prices have reshaped who pays inheritance tax in modern Britain.
This growing tax burden has also sparked frustration among the public. A recent YouGov poll found that more than half of respondents—around 54%—believe inheritance tax should be abolished altogether. Many feel the tax is outdated and unfairly punishes families for simply owning homes in an inflated property market.
In response to the growing uncertainty, financial advisers are already seeing changes in client behaviour. Increasing numbers of people are choosing to transfer assets to family members earlier in life, hoping to avoid potential increases in inheritance tax. This has become a common strategy for those worried that new rules could tighten the thresholds or raise the rate.
Equity release advisers are also noticing a sharp rise in homeowners withdrawing value from their properties. According to data from the Equity Release Council, the number of equity release withdrawals increased by 10% in the second quarter of 2025, with the average homeowner releasing £126,422. Many believe this trend will continue as the Budget approaches, with homeowners taking pre-emptive action before any potential policy changes take effect.
David Alexander argues that inheritance tax is no longer a levy on the rich—it is increasingly a tax on middle-class families who happen to own property. He notes that many of those now affected are not wealthy individuals with large estates but rather ordinary homeowners who have simply benefited from long-term house price growth.
He believes that it is misleading to label these individuals as “rich.” In reality, they are people who have spent decades working, saving, and paying off their mortgages, only to now find themselves being taxed as if they were high-net-worth individuals. This, he says, is a deeply unfair and unrealistic measure of wealth in today’s housing market.
Furthermore, Alexander highlights a major imbalance in how inheritance tax affects different social groups. The very wealthy, he explains, can afford teams of accountants and financial advisers who help them navigate complex tax structures to minimise their liabilities. Meanwhile, it is those with modest estates—people who lack such resources—who end up paying the most in relative terms.
He warns that any government attempt to tighten inheritance tax rules could have serious unintended consequences. Homeowners are unlikely to simply accept higher tax rates or lower thresholds without reacting. Instead, they are likely to adjust their behaviour, moving money or gifting assets earlier in order to protect their families’ wealth.
This behavioural shift could actually backfire on the Treasury. If more homeowners start transferring assets early or using equity release to reduce their taxable estate, the overall revenue generated from inheritance tax could fall, undermining the very purpose of the reform. In short, Alexander believes the government may collect less, not more, if it underestimates how households will adapt.
To make the system fairer, Alexander suggests that instead of tightening inheritance tax, the government should focus on reforming it. Reducing the rate, simplifying exemptions, and closing loopholes could create a more balanced and transparent structure—one that raises funds without disproportionately targeting middle-income families.
Ultimately, Alexander insists that these proposed changes would unfairly punish the very people who have done everything society expects of them: working hard, saving diligently, and investing in their homes. “These are individuals who have contributed to the economy throughout their lives,” he says. “It cannot be right that they are now treated as easy targets for extra taxation simply because their homes have risen in value.”
In summary, while the government’s plans to address wealth inequality are well-intentioned, experts warn that inheritance tax reforms could have far-reaching effects beyond their original scope. Unless thresholds are adjusted and fairness restored, millions of ordinary British homeowners could find themselves paying the price for policies meant to target the ultra-rich.
Download NOW
4 Simple Steps To Becoming Wealthy Through Property