Industry expert says concern over potential rule changes is creating a property market standstill
Uncertainty surrounding possible changes to inheritance tax is causing a slowdown in the UK property market, with both buyers and sellers choosing to wait for clarity ahead of the autumn Budget, according to an executive of a property buying company.
“This inheritance tax vacuum from the Treasury is creating real problems across the market,” said Saddat Abid, chief executive of Property Saviour. “We’re seeing families who would normally move up the property ladder just sitting tight, worried about potential rule changes.”
Abid said this observation is also reflected in a recent analysis from Savills, highlighting a trend of prospective buyers postponing purchases, as the market awaits details of Chancellor Rachel Reeves’s plans.
Recent cases illustrate the impact of the current situation. One couple in their 60s, who had intended to downsize from their £800,000 home, have decided to delay their sale due to concerns about losing the residence nil-rate band, which currently provides an additional £175,000 inheritance tax allowance. Meanwhile, a young family has postponed their first home purchase because their parents, who planned to assist with the deposit, are uncertain about the future tax implications of gifting money.
Reports suggest the Treasury is considering a lifetime cap on tax-free gifts, which would mark a significant shift from the current system. At present, individuals can make unlimited gifts, provided they survive seven years after the transfer. The proposed cap is seen as a potential measure to address a government funding gap.
Abid (pictured right) noted that such a change could affect ordinary families, not just the wealthy. Research from Quilter indicates that UK retirees typically give around £2,500 each year to family members for education or living expenses. Under a lifetime cap, these regular gifts would count toward a total limit, potentially affecting families who have not previously engaged in inheritance tax planning.
The administrative burden of tracking gifts over many years is another concern. Incomplete records could lead to disputes with HM Revenue & Customs. With property values rising and tax thresholds frozen, more middle-income households are being drawn into the inheritance tax system.
Abid advised families to continue making regular, documented gifts within existing annual exemptions while current rules remain in place. He emphasised the importance of keeping detailed records and avoiding rushed decisions. “Families should use existing gifting opportunities sensibly while they still can, rather than waiting to see what restrictions might come,” he said.
According to reports, the Treasury is considering inheritance tax hikes to address a funding shortfall estimated between £20 billion and £70 billion. Eliminating the residence nil-rate band could reduce a couple’s tax-free threshold from £1 million to £650,000, potentially bringing around 30,000 more families into the inheritance tax bracket.
“This inheritance tax uncertainty is creating a property market standstill that benefits nobody – not buyers, sellers, or the Treasury looking for revenue,” Abid said.
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