The shadow chancellor is considering plans to impose a new lifetime gifts tax with a threshold of just £125,000.
The Labour party has confirmed it is considering plans that will increase the receipts from inheritance tax from its current £5.3bn per year to £15bn. This will include a radical shift from taxing estates to taxing the actual recipients with a much lower threshold before tax becomes due. Under the new proposals, a new lifetime gifts tax would be introduced with a threshold of £125,000. After the lifetime limit is reached, any surplus gifts would be taxed at income tax rates, which currently go up to 45%, but are going up to 50% under a Labour government.
If you are looking to minimise the impact of this new tax, there are two obvious options:
- accelerate the process of transfers of wealth to your children or grandchildren ahead of any possible Labour government; or
- delay transfers of wealth until after a Labour government in the hope that IHT will be reduced again.
Current proposals suggest there might still be some exemptions from IHT for businesses being handed from one generation to the next. On that basis, families may want to retain their businesses longer than they had planned – as gifts from the sale proceeds of a business will fall under the new IHT rules.
It remains to be seen how these proposals would interact with existing trusts. Presumably IHT on trusts themselves may be abolished but distributions may well be treated as lifetime gifts, subject to the new cap.
Whilst none of us has a crystal ball, for some, they may wish either to accelerate their plans, or, for others, delay their plans.
For substantive advice tailored to your circumstances please contact Edward Walter, Solicitor at Buss Murton Law LLP on T: 01892 502 320 or E: ewalter@bussmurton.co.uk
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