𝓤𝓷𝓲𝓽𝓮𝓭 𝓝𝓮𝔀𝓼

Rachel Reeves’ potential new tax raid could crush the dreams of first-time buyers and send house prices plummeting, experts have warned. The Chancellor is reportedly considering a lifetime cap on the value of gifts that someone can pass on before they die without paying tax. If implemented, large sums handed over would count as part of an estate for inheritance tax purposes, even if they are given decades before the person dies.

This, it is feared, could deter parents from giving their children money to help them get on the property ladder. Nicholas Mendes, of mortgage broker John Charcol, told The Telegraph this would send house prices plummeting and result in fewer people buying homes. And Simon Shaw, Savills’ finance chief, warned that a “vacuum” of information about tax changes could prompt people to wait before buying a house, in a blow to the property market. He said: “In the interim period, it creates a level of uncertainty in the residential market particularly. It’s classic uncertainty. People fill the vacuum with their own fears about what might happen”. Currently, 52% of first-time buyers rely on the bank of mum and dad, estate agency Savills reported.

Parents are allowed to pass on as much money as they want without paying inheritance tax, as long as it’s transferred at least seven years before they die.

Assets over £325,000 gifted between three and seven years before death are taxed between 8% and 32%, and 40% in the last three years.

In 2024, nearly 173,500 first-time buyers received an average of £55,572 from their parents. That year alone, gifts and loans from parents came in at a whopping £9.6 billion.

Roarie Scarisbrick, of buying agent Property Vision, warned that changing the current gifting rules would only pose more issues for an already “clogged up” property ladder.

He told the outlet: “You’ve got people moving up and down the ladder all the time, and each rung depends on the others. The problem over the last few years is that taxes, like stamp duty, have really clogged up the chain.”

Homebuyers in London and the South East would be hit hardest by the change, Aneisha Beveridge of Hamptons said.

Deposits set first-time buyers in London back £137,863, compared to £68,631 in the South East and £26,858 in the North East, Savills added.

A Treasury spokesman said: “As set out in the Plan for Change, the best way to strengthen public finances is by growing the economy, which is our focus.

“Changes to tax and spend policy are not the only ways of doing this, as seen with our planning reforms, which are expected to grow the economy by £6.8bn and cut borrowing by £3.4bn.

“We are committed to keeping taxes for working people as low as possible, which is why at last October’s Budget, we protected working people’s payslips and kept our promise not to raise the basic, higher or additional rates of income tax, employee National Insurance, or VAT.”