Rachel Reeves is eyeing a £1billion inheritance tax raid on aristocrats and landowners who put their money in property.
The Chancellor could reform business relief, closing a loophole that allows the wealthy to halve their inheritance tax bills at a cost to taxpayers of £2billion a year.
She could also target agricultural property relief which is designed to help farmers pass on their businesses, but has been used by the rich to avoid inheritance tax.
Critics say the changes could endanger the ‘rural way of life and the nation’s food security’.
The move is part of a bid to raise £35billion in what would be the largest tax-raising Budget in history on October 30.
The Chancellor is already reported to be looking at changes to income tax thresholds and inheritance tax rules, as well as increasing national insurance (NI) contributions by employers.
Scrapping loopholes for business and agricultural property relief could earn the Treasury £1 billion, the Sunday Times reported.
The Treasury intends to exempt small businesses and family farms to protect British farmers and the move is likely to hit aristocrats hardest as they own 30per cent of England’s land, the paper said.
The Chancellor is said to believe that closing the loopholes is the ‘fair way’ to raise money from the wealthy.
Earlier this year, a report by the Institute for Fiscal Studies concluded that the wealthiest were using business relief to more than halve their inheritance tax bills.
‘These reliefs are the most heavily used by the biggest estates,’ it said.
Last year, more than £1.4 billion was paid out to more than 3,000 estates in business tax relief. £400million was paid out in exemptions on agricultural land.
By exempting small businesses and family farms, the Chancellor’s reforms would raise around £1billion in total.
However, the Country Land and Business Association (CLA) said the changes could ‘endanger our rural way of life, and the nation’s food security’ if not applied carefully.
Victoria Vvyvan, its president, said: ‘Labour has said it’s the party of the countryside. Farmers need clear assurances that this commitment will last beyond the Government’s first year in office.
‘Scrapping APR would threaten the future of family farms across the country.. Without it, countless farmers would be forced to sell land to cover inheritance taxes, endangering our rural way of life and the nation’s food security.’
Other ideas under consideration at the Budget include extending the seven-year rule to ten years on passing on wealth without paying inheritance tax on it.