Labour chancellor Rachel Reeves is warned her inheritance tax hike will decimate middle class savings and leave 'people who have saved all their life' without an inheritance to pass to their children

Labour chancellor Rachel Reeves has been warned her inheritance tax hike will decimate middle class savings.

It has been reported by the BBC that she is planning on increasing the amount of money raised from inheritance tax in her October 30 budget.

But as the backlash against her budget grows, Senior Conservatives have said the move would force those who had saved all their lives to 'pay the price'.

Reeves' first fiscal statement since Labour's July election victory will set out how she intends to fix a huge shortfall in the government's day-to-day budget while sticking to pledges not to raise the main taxes paid by what it calls 'working people'.

A number of possible changes to inheritance tax exemptions and reliefs are under consideration, the BBC reported without citing named sources.

When asked for comment on changes to inheritance tax, the finance ministry said it did 'not comment on speculation around tax changes outside of fiscal events'.

Sir Iain Duncan-Smith told the Independent the tax would 'punish ordinary people who have worked hard'.

Referencing the £325,000 cut-off for charging inheritance tax, the former Tory leader said: 'We're not talking about 'zillionaires'. With house prices in southern England, you won't even get a flat for that money. A two-bed flat in London would be twice that price.'

The tax is paid at a rate of 40 percent on the value of estates above a threshold of 325,000 pounds - which has not changed since 2009.

It is currently paid after only 4 percent of deaths, raising about 7.5 billion pounds ($9.80 billion) per year.

Within inheritance tax there are allowances for transferring family homes to younger generations, as well as business and agricultural reliefs.

From the budget as a whole, Reeves is said to be looking at introducing tax rises and spending cuts to the tune of 40 billion pounds, as she looks to put investment into services while also stabilising the fiscal situation.

Middle class families appear to be facing a Budget pummelling from Rachel Reeves as she looks to end tax breaks in a scramble for cash.

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The Chancellor will reportedly end a temporary increase to the stamp duty threshold, landing buyers with a £2,500 bill that will add £1.8billion to Treasury coffers.

And fuel duty is set to rise by up to 7p a litre, with Whitehall sources saying the Chancellor will not renew a 'temporary' 5p cut due to end in March next year after 14 years.

In what looks like to be a testing Budget for Brits across the board, she is also understood to be seeking to make around £3 billion of cuts to welfare over the next four years by restricting access to sickness benefits.

The Chancellor is expected to commit to the previous Tory government's plans to save the sum by reforming work capability rules, as first reported by The Telegraph.

Even vaping is set to become more expensive, with ministers seeking to reduce the rate of children using the addictive tobacco inhalers by increasing tax.

NHS figures cited by the Guardian show around a quarter of children aged 11 to 15 have used them.

Tax is likely to make up the overwhelming bulk of the package - meaning it could exceed the £31.3billion brought in by Rishi Sunak's post-Covid Budget in Spring 2021.