Rachel Reeves just created an inheritance tax nightmare for Middle Britain

Rachel Reeves, UK chancellor of the exchequer, outside 11 Downing Street
Rachel Reeves has inflicted a spiteful tax raid that will take Britain years, probably decades, to recover from - Chris J Ratcliffe/Bloomberg

In little more than an hour, Rachel Reeves has inflicted a spiteful tax raid that will take Britain years, probably decades, to recover from.

This first Labour Budget in 14 years was brutal, but the cruelty will be in the detail. The standout raid on your money was her decision to make pensions subject to inheritance tax.

Currently, pensions are protected from the punitive 40pc charge and do not count towards the value of your estate. The Chancellor has thrown all that out and will include your pensions in the total value of your estate when you die.

And at the same time she froze the inheritance tax thresholds, which add up to £500,000 when including a family home, until 2030.

Make no mistake, this cynical move will drag many, many more estates into the scope of death duties. Labour has just weaponised inheritance tax against anyone with a modest home and retirement savings.

This is not just a tax grab, but a cruel raid on those who die before their time who have saved responsibly for retirement. Why now would anyone save into a pension knowing that if they die young, the Government will take a 40pc slice?

The rule comes into force in 2027 and will presumably replace the current law that requires anyone receiving an inherited pension (from someone who died aged 75 or over) to pay income tax on it.

Another sting was the increase to the interest rate due on tax outstanding. This is already the Bank rate plus 2.5pc (currently 7.5pc) It will now rise to 9.5pc. This will be another cruel blow to families who owe inheritance tax but cannot meet the six-month deadline because of delays in our probate system.

Reeves’s £40bn package of tax rises also included increased National Insurance contributions for employers, higher rates of capital gains tax on assets other than property and an extra two percentage points on the current 3pc stamp duty surcharge for landlords and second home buyers.

Labour set out not to raise taxes for “working people” in an attempt to stick to its hopelessly naive (or cynically calculated) election pledge.

This meant that Reeves has instead hit those who have worked hard and saved hard into their pensions.

Businesses have also been stung with a barrage of tax rises and extra costs that they can ill-afford. This Budget was an attack on those who pay the wages of “working people” and it doesn’t take a genius to work out what the results will be. Employers will rein in spending, hiring and scrimp on pay. Profits will fall and the Treasury’s tax take will drop. Who else will suffer? Workers.

This Budget will be felt painfully in the pay packets of working people. There’s no escaping it and Labour can never pretend it didn’t know it.

Jeremy Hunt, the shadow chancellor, this week warned it would be the most damaging Budget since 1974 when Denis Healey, the then-Labour chancellor, said he would “squeeze the rich until the pips squeaked”.

Indeed, this was the typical Labour Budget; ideologically driven, short-sighted, hopeless and will ultimately harm the ones it professed to help.

It was telling that the Treasury released a photograph of Reeves preparing the night before the Budget – with a portrait of Nigel Lawson switched out for one of Ellen Wilkinson, a female MP who co-founded the Communist Party of Great Britain.

Rachel Reeves replaced a portrait of Margaret Thatcher's chancellor with a picture of Ellen Wilkinson
Rachel Reeves replaced a portrait of Margaret Thatcher’s chancellor with a picture of Ellen Wilkinson - Kirsty O'Connor / Treasury

Margaret Thatcher’s portrait has also been removed from Number 10. Why wouldn’t Reeves and Sir Keir Starmer want to be reminded of the two leaders who had to drag Britain out of the mess left by the Labour government of the 1970s?

Labour’s first decisions in power have been telling. Step one, give taxpayer-guaranteed pay and pension rises to the unproductive, bloated and wasteful public sector. Step two, make life harder for the private businesses whose money and investment we need.

Reeves is taxing the hell out of us to “fix the foundations” without considering why the foundations might be broken in the first place. This Budget will pour billions more into the public sector black hole.

Labour is now once again the only thing standing in the way of growth, prosperity and more money in your pockets.

But Labour couldn’t resist meddling, and now we will all be poorer for it – whether we are working people or not.