What Rachel Reeves is up to in her own words: Our financial experts’ extensive research reveals how she could hit you for inheriting your house… and capping your ISA

Chancellor Rachel Reeves may not be Britain’s most popular person later this week, but to her credit she has always been vocal about what she thinks this country needs.

During her time in opposition, she wrote numerous columns criticizing the government and pushing her own agenda. To get a taste of what could be in her first budget, Wealth & Personal Finance scoured these articles to unearth policies she has fiercely pushed for – and policies she has openly despised.

Inheritance benefit could go

It is no secret that Ms. Reeves believes inheritance taxes are too generous, and she is widely expected to announce a tightening of inheritance taxes.

Writing for The Guardian in 2017, she focused on former Chancellor George Osborne’s plan to lift inheritance tax from £325,000 to £500,000 per person so that a £1 million family home can be passed on tax-free. She called it “unjust” and “poorly thought out,” and labeled it a “tax break for the wealthy elite.”

So the current real estate transfer fee could be on the chopping block.

Andrew Marr, managing partner of tax specialist Forbes Dawson, suspects this allowance is “obvious” as most people sell houses they inherit rather than live in them.

Currently, you can pass on up to €325,000 free of inheritance tax after death – and couples who are married or in a civil partnership can pass on €650,000. Anything above this compensation is taxed at a flat rate of 40 percent. Those who leave a property to a direct descendant will each receive an additional allowance of £175,000, known as the residency nil rate band, meaning £500,000 will be tax free.

So a couple who are married or in a civil partnership can pass on a family home worth £1 million free of inheritance tax. If the property allowance is abolished on Wednesday, their loved ones will face a £140,000 tax bill.

Your ISA may have a limit

The tax-efficient individual savings account (Isa) could come under fire if Ms Reeves follows through on her vision of a lifetime cap on tax-free accounts.

Eight years ago, in an article for The Independent, she called for a £500,000 limit on the amount savers could put into Isas.

Savers and investors can put up to £20,000 into Isas each tax year, where it grows tax-free on interest, capital gains or dividends. This annual fee can be spread across different Isa types, including both cash Isas and stocks and shares Isas.

But any change could discourage investors and cause uproar among the 40,000 people who currently have more than £500,000 in Isas.

That £500,000 limit would be breached if an investor put just half the current annual fee into an Isa every year for 25 years, assuming it grows at just 5 per cent a year, according to calculations by Hargreaves Lansdown.

There are also fears that the Chancellor could limit the annual allowance.

When Ms Reeves wrote about Isas in January 2016, the limit was £15,000 a year, which she said should remain.

Using landlord tax to fund social care

Social care funding was in the spotlight this summer when the chancellor scrapped plans for an £86,000 cap on what someone would have to pay for personal care over their lifetime. But she could plan to fund it instead by imposing a new levy on landlords and investors, if an earlier article she wrote for The Mirror is followed up.

The 2021 article criticized the Conservatives’ ‘unfair’ jobs tax – an initial 1.25 percentage point increase in National Insurance contributions to fund social care. Instead, she said, there were other ways to raise this money, including taxing the incomes of landowners and “those who buy and sell large amounts of financial assets, stocks and shares.”

It is unclear whether Ms Reeves was suggesting the funding should be raised through a direct tax increase on landlords or an increase in capital gains taxes. Experts warn that a rise in capital gains taxes is one of the most likely changes coming this week.

Pension tax reduction for high income earners

Ms Reeves has long advocated a flat rate for the tax relief paid for pensions – currently employees receive tax relief at the income tax rate.

The Chancellor was said to be seriously considering an overhaul of the system but was forced to scrap it after being warned it would impact a million teachers, nurses and other public sector workers.

In a piece for The Times in 2016, she wrote that then-Chancellor Osborne should set a flat rate for pension tax relief.

‘It would be simpler, fairer and an important step towards encouraging pension savings. Figures between 20 and 33 percent have been published for this rate. I believe it should be 33 percent,” she said.

Charlene Young, pensions expert at investment platform AJ Bell, explains that if a 33 per cent rate were introduced for everyone, savers who get tax relief at the basic 20 per cent rate would get a boost. However, it would be an additional blow to higher income earners, who would lose significant portions of their tax relief.

The tax credit for pensions could pose an even bigger threat if the Chancellor goes further and follows her previous calls for it to be replaced entirely.

Writing for The Independent in 2016, Ms Reeves called for a ‘simple savings bonus’, where for every £1 you ‘put in’ you get 25 or 30p from the public purse. She said if you saved $1,000 a year, you could get $250 or $300 on top of that. This would come with annual and lifetime limits on what you can save.

Although a spokesperson for Ms Reeves said Labor had “no plans” to change pension tax relief during the election campaign, they refused to rule out future changes.