Five key tax talking points before next week’s budget
The article outlines the tax issues likely to feature in John Healey’s first budget as chancellor on 28 October. Labour has pledged not to raise income tax, national insurance or VAT, so attention has turned to other taxes and whether changes could affect people who do not see themselves as wealthy.
Inheritance tax receipts reached £8.5bn in 2025-26, and the OBR forecasts they will rise to £14.5bn by 2030-31; about 5% of estates currently pay it. The standard rate is 40%, but allowances mean a couple can pass on up to £1m to descendants tax-free in qualifying cases, and the average effective rate across taxable estates was 13% in 2023-24. From April 2027, unused defined contribution pension funds will count towards inheritance tax, while capital gains tax receipts rose nearly 80% to £24.3bn in 2025-26 after cuts to its annual tax-free allowance.
In short
- Healey’s budget is due on 28 October.
- Inheritance tax receipts are forecast to reach £14.5bn by 2030-31.
- Unused defined contribution pensions will count towards inheritance tax from April 2027.
Steelman: both sides, in good faith
The strongest fair case each way — we don't pick a winner.
The case for
Supporters of broadening inheritance tax to include unused pension funds and limiting tax reliefs argue that these changes can make the system fairer, since people with substantial assets may otherwise pass on wealth with relatively little tax. Rising receipts and forecasts suggest the tax is already an important source of revenue, while allowances mean most estates remain outside its scope. They may also see capital gains tax as a way to ensure gains from wealth are taxed more consistently.
The case against
Critics argue that changing inheritance tax rules risks catching families who have saved through pensions without seeing themselves as wealthy, and that the headline 40% rate can make the burden feel steep even where the effective rate is lower. They may regard pension savings as income set aside for later life or for family, and say taxing them on death could discourage saving or create uncertainty about long-term plans. They also warn that repeated changes to allowances and reliefs can make tax planning harder for households and businesses.
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