Rachel Reeves faces a major setback ahead of the Autumn Budget as many older homeowners seek ways to avoid Labour's inheritance tax raid. Over-55s have reportedly ripped a staggering total of £636m from their homes as they borrowed against their properties. Equity release advisers saw a sharp increase in inquiries following the tax changes announced last year, in a bid to protect their money. According to the Equity Release Council, there was a 10% year-on-year increase in the amount unlocked from houses in the UK.

The rise was mainly due to new borrowers taking out an average of £126,422 from properties which is possible with a lifetime mortgage, allowing for over-55s to borrow against their homes in exchange for a tax-free sum of money. Homeowners are also inquiring into gifting money as a way to avoid the steep inheritance tax.

Andy Shaw, of broker SPF Private Clients, said his firm had received a higher number of people interested in this, with the funds often used to pay for a house deposit or school fees.

"We expect this to continue as we move nearer to April 2027, when pensions are due to fall into the inheritance tax calculation," he toldThe Telegraph.

"Most commonly, the funds released are gifted by the borrowers to their children or grandchildren, and will usually become a potentially exempt transfer, and thus fall outside of their estate after seven years."

In the UK, Brits can give up to £3,000 a year to friends and families without the risk of inheritance tax. Any figure higher than this will only be automatically exempt after seven years.

David Forsdyke, of Knight Frank Finance, has also seen an increase in equity release inquiries.

"The fact that pensions will now be taxed has meant more wealthy homeowners in their 70s are thinking of ways to transfer funds out of their estate," he said.

With pensions set to be liable for inheritance tax, thousands of estates will fall into the threshold for paying the levy.

Mr Forsdyke warned that raising debt against a home can "erode the equity in the property", which may be an issue in the future for those looking to downsize.

However, he said: "The upside is you get to transfer wealth to the next generation. A lot of clients will tell me they want to see their child or grandchild benefit from their wealth while they're still alive. So it is an emotional decision as well as a financial one."