Families face inheritance tax raid as Rachel Reeves looks at ways to plug budget black hole

The Treasury is considering a lifetime cap on the value of gifts that someone can pass on before they die in order to reduce their eventual IHT bill, sources have told the Guardian.

Rachel Reeves is also thought to be considering potential changes to capital gains tax in another attempt to target wealth. It comes amid the Chancellor battling a black hole of up to £50 billion in this autumn's budget.

Sir Mel Stride, the Conservative shadow chancellor, said: "Those who have worked hard, saved and want to pass something on to their loved ones shouldn’t be punished by yet more taxes from Labour.

"Tax rises are coming to paper over the cracks of the Chancellor's economic mismanagement. Nothing is safe under Labour – not your job, your business, your farm, your savings or your pension. Rachel Reeves is taxing your family’s future to fund her failure."

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At the moment, gifts made seven years before someone dies are not subject to IHT, while those given three to seven years before death are taxed on a sliding scale known as "taper relief", with the rate reducing each year from 32 per cent to 8 per cent.

A lifetime cap could potentially be introduced to limit the amount of money or value of assets an individual can donate as part of their IHT planning, and the Treasury is also reviewing rules around the taper rate.

A source told the Guardian: "With so much wealth stored in assets like houses that have shot up in value, we have to find ways to better tap into the inheritances of those who can afford to contribute more.

"It’s hard to make sure these taxes don’t end up with loopholes that undermine their purpose. But we are trying to work out what revenue might be raised and how to ensure it’s a fair approach."

The source also said: "IHT can raise more, and even if we do nothing, it will raise more money as the threshold for paying it stays frozen. But we have to look at the levers for taxing wealth if the aim of the government is to avoid hitting earnings from work as much as possible."

IHT changes have generated a strong public response in the past, despite fewer than one in 20 estates having paid it in recent years.

Reeves has been the subject of criticism over the past year in response to her decision in last autumn’s budget to cut tax breaks for farmers passing on their businesses.