HMRC to Recover Taxes from 14,000 Households! London Underground Fares to Rise by 5.8% Next Year! UK Economy Shrinks Again
- TBA
- Dec 15, 2025
- 6 min read
Updated: Dec 22, 2025
HMRC sending 14,000 UK households tax bill under ‘seven-year rule’
The UK tax authority, HM Revenue & Customs (HMRC), is sending tax recovery bills to more than 14,000 British households after they breached inheritance tax rules under the so-called “seven-year gifting rule.”
Data shows that because the donor died less than seven years after making the gift, HMRC has reclaimed around £3 million in inheritance tax from the affected families. Many households had hoped to reduce their inheritance tax burden by making gifts in advance, only to find the strategy backfired: while coping with the loss of a loved one, they were also required to pay additional tax on gifts that failed to meet the qualifying conditions.
The Times reported that in the 2022/23 tax year, a total of 14,030 lifetime gifts were brought back into the inheritance tax calculation because they did not satisfy the seven-year rule. Among these, the 25 largest gifts were each worth an average of about £7.9 million, even after all available allowances and reliefs had been fully used.
Overview of UK Inheritance Tax Rules
The current UK inheritance tax (IHT) rate is 40%, applied to the portion of an estate exceeding the £325,000 tax-free threshold. If the estate includes a main residence left to direct descendants (children or grandchildren) and the total estate value is below £2 million, the tax-free allowance can rise to £500,000. To reduce their IHT liability, many high-net-worth individuals choose to gift part of their assets to relatives during their lifetime. However, such arrangements must strictly comply with relevant regulations.
Under current rules, if a gift is made within seven years of death, it may be subject to inheritance tax, depending on the relationship between the donor and the recipient, the value of the gift, and the timing. Assets that can be treated as “gifts” include cash; personal possessions such as furniture, jewellery, and antiques; as well as property, land, listed shares, and unlisted company shares held within two years before death. If a gift is made between three and seven years before death and the total estate exceeds the tax-free threshold, the relevant assets are taxed on a tapering basis, with rates ranging from 8% to 32%.
RBC Brewin Dolphin, the investment firm that submitted the freedom of information request, said: “Strategic gifting was once seen as a tool reserved for the super-rich, but it has now become increasingly mainstream.” This is particularly true for farmers, who are considering how to pass on land and other assets to the next generation while avoiding large inheritance tax bills.
Under new rules due to take effect in April 2026, only the first £1 million of combined agricultural and business assets will continue to qualify for 100% inheritance tax relief. Any amount above this threshold will receive a 50% reduction on the standard 40% tax rate, resulting in an effective rate of 20%. Critics warn that once implemented, the new policy could have a devastating impact on family farms and may even threaten the survival of some of them.
London Underground fares to go up by 5.8% in 2026
Previously, the UK Department for Transport announced a policy to freeze rail fares across England, but this will not apply to services operated by Transport for London (TfL).
London Mayor Sadiq Khan has confirmed that from March 2026, fares on the London Underground (the Tube), London Overground, and the Elizabeth line will increase by 5.8%. This rise is one percentage point above the inflation rate. He added that, as planned, only Tube and TfL rail services will see fare increases from March 2026. He also stressed that pay-as-you-go Tube fares will rise by no more than 20 pence, with many routes increasing by just 10 pence.
According to figures released by the Greater London Authority:
Off-peak travel: A Tube journey from Tottenham Court Road (Zone 1) to Edgware (Zone 5) will rise from £3.60 to £3.80.
Travel within Zone 1: Peak-time fares will increase from £2.90 to £3.10; Off-peak and weekend fares will rise from £2.80 to £3.00.
Peak-time travel:A Tube journey from Upminster (Zone 6) to Cannon Street (Zone 1) will increase from £5.80 to £5.90.
The fare increase will apply to all rail services operated by TfL, including the Docklands Light Railway (DLR).
In addition, Travelcard prices will be frozen until March 2027, meaning that daily and weekly fare caps will remain unchanged. London bus and tram fares will also continue to be frozen.
The Mayor said the increase in Tube and rail fares was one of the conditions of a £2.2 billion capital funding agreement reached between TfL and central government during the spending review in June this year. Meanwhile, the freeze on bus and tram fares until July 2026 is being funded by City Hall as an “emergency measure to help with the cost-of-living crisis.” He said: “This is the seventh time I have frozen bus and tram fares, and this measure will particularly benefit low-income groups across the city.”
UK economy shrank unexpectedly by 0.1% in October
According to the latest data released by the UK Office for National Statistics (ONS), the British economy unexpectedly contracted on the eve of the Spring Budget announcement. The figures show that the UK economy shrank by 0.1% month on month in October, compared with economists’ prior expectation of a 0.1% expansion. In addition, over the three months to October, the economy as a whole also contracted by 0.1%.
Analysts pointed out that a cyberattack suffered by Jaguar Land Rover (JLR) continued to disrupt car production. Although output recovered slightly in October compared with September, the rebound was limited. At the same time, uncertainty ahead of the Autumn Budget weighed on consumer and business spending. Many analysts believe the weaker-than-expected data further strengthens the case for the Bank of England to cut interest rates at its meeting this week.
Ruth Gregory, Deputy Chief UK Economist at Capital Economics, said the unexpected contraction “further supports expectations that the Bank of England will cut interest rates this Thursday.” She added: “What is striking is that over the past seven months, the economy has grown in only one month.”
By sector, industrial output fell by 0.5% in the three months to October, mainly due to a 17.7% year-on-year collapse in car manufacturing output. The cyberattack on Jaguar Land Rover led to a complete shutdown of its UK factories in September, with production only gradually resuming in early October. Meanwhile, the services sector—which accounts for around three quarters of the UK economy and includes professional services and retail—recorded no growth at all in the three months to October. Previously, the UK economy contracted by 0.1% in September and was flat in August.
Although monthly GDP figures can be volatile and three-month rolling data better reflect underlying economic conditions, Jack Meaning, Chief UK Economist at Barclays and a former adviser to the Bank of England, said the latest data show the UK economy is “clearly weak.”
Economists at the National Institute of Economic and Social Research (NIESR) also noted that the chancellor’s move to increase fiscal buffers in the budget could help reduce uncertainty over the coming year, but whether it will boost economic activity remains to be seen.
Economic growth has been one of the Labour government’s core priorities. A spokesperson for HM Treasury said the government is seeking to drive growth by cutting energy bills and increasing investment in infrastructure.
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