Scotland’s landlords warned over inheritance tax changes

Landlords in Scotland could face higher inheritance tax bills if the government changes the rules in its forthcoming Budget.

The warning comes from leading property expert David Alexander, who says speculation about possible changes is likely to concern property owners.

He is the chief executive of estate and lettings agency DJ Alexander, and he argues that any reform intended to raise more money for the Exchequer could leave those owners paying more.

He says rising house prices have already drawn people into inheritance tax whose estates would previously have escaped it.

Property wealth under scrutiny

Mr Alexander said: “This tax increasingly impacts on ordinary homeowners who have simply seen the value of their property and assets increase over the last three decades.

“To state that someone who has paid a mortgage and saved all their life and accumulated assets worth over £325,000 is now rich is clearly not a realistic definition of wealthy.”

He added: “The greatest irony in all of this is that these increases in IHT won’t hit the very wealthy who have advisers and accountants to ensure their liability is reduced.

“It will be those in the middle who cannot afford such advice and are hit with an increasingly punitive targeting of their homes, pensions, savings, and general assets which are all seen as fair game.”

Frozen inheritance tax threshold

The £325,000 nil-rate band has been frozen since 2009 and is due to remain unchanged until 2031.

According to Mr Alexander, it would now stand at £538,414 had it risen with inflation.

Inheritance tax receipts reached £7.03bn in 2023/24, an increase of 5% on the previous year.

Meanwhile, the Office for Budget Responsibility forecasts receipts of £9.1bn for 2025/26, rising to £14.5bn in 2030/31.

Possible inheritance tax changes

Among the ideas being discussed, according to Mr Alexander, is replacing inheritance tax with a care levy charged at 10% of the value of assets.

He argues that such a change would cost homeowners more if its purpose were to increase government revenue.

Mr Alexander also points to the inclusion of pensions in inheritance tax assessments from April 2027, which it says is expected to bring another 50,000 estates into the tax.

Public surveys in Scotland found that 54% wanted inheritance tax abolished, while 67% favoured higher thresholds to reduce the number of estates affected.