Rachel Reeves is reportedly looking at tightening rules around the gifting of assets and money in a bid to help fill the UK’s multi-billion-pound fiscal shortfall.
According to reports in The Guardian, Reeves has instructed officials to look at a potential cap on lifetime gifts, part of a broader review into how assets can be transferred before death to minimise inheritance tax liabilities.
Tom Goddard, senior associate at accountancy firm Blick Rothenberg, said reforming inheritance tax (IHT) was unlikely to cover much of the hole in the public finances facing Reeves.
“IHT generates around £8bn per year. Given the latest deficit figures we are seeing are [at the extreme end] around £50bn, I don’t think tampering with IHT would be a particularly fruitful endeavour for her,” he said.
“PETs are only really relevant for wealthy individuals anyway, as they can afford to give away large sums/assets whilst still living. Typically, those who fall into this IHT bracket will be able to mitigate their IHT exposure by moving overseas, or even giving away even earlier.”
“There is scope for change, and there are good rationales for having a different system, in the same way that there could be a rationale for not taxing the gifts at all. But if you’re looking at the kind of incremental changes, it’s not going to be making much of a difference revenues-wise,” Mr Sturrock said.
Gifts made between three and seven years prior are taxed on a sliding scale, depending on their value and the total estate.
In July, some Labour Party figures, including former leader Lord Neil Kinnock and Wales’s First Minister Baroness Eluned Morgan, called for a wealth tax.
“I think that there does need to be an increase in tax and inheritance tax, actually, I think it’s an easy one,” the MP said. “So many people’s overall estate is not even what they’ve labored for through their life, it’s their capital gains on it and it’s unearned wealth. If we have to raise money from somewhere, then it seems to me that increasing inheritance tax is probably the right thing to do.”
“We are committed to keeping taxes for working people as low as possible, which is why at last autumn’s budget, we protected working people’s payslips and kept our promise not to raise the basic, higher or additional rates of income tax, employee national insurance or VAT.”
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