01273765959 mail@griffithsmithfm.co.uk

Could we see the back of inheritance tax?

4th July 2019

Could we see the back of inheritance tax?

A paper presented to the Labour Party has suggested the abolition of inheritance tax (IHT).

Labour Party proposals to kill off inheritance tax (IHT) and replace it with a gifts tax were reported across several newspapers last month. The coverage was somewhat creative, as the idea was plucked from a paper prepared for the Labour Party primarily focused on reforming the taxation of land. The gifts tax section covered just half a page and did little more than regurgitate a structure proposed over a year ago by the Institute for Public Policy Research (IPPR).

These proposals are not yet Labour Party policy –they will only be considered when the party prepares its manifesto for the next election, which could be as far away as 2022. However, it’s worth considering how IHT might be transformed into a gifts tax.

The major change proposed is that liability would shift to the recipient of a gift or legacy, not the person making the gift or bequest. This approach is common in other countries which levy estate taxes. The IPPR framework would make gifts and bequests totalling £125,000 (indexed to inflation) over a lifetime free of tax. Beyond that threshold, any amount received would be treated as income and taxed accordingly. The new tax would apparently raise almost three times as much as IHT. The paper on land tax reform added one tweak to the IPPR proposals: a new tax on equity release which it described as a “key means of avoiding inheritance tax”.

IHT is generally regarded as the UK’s most hated tax, despite the relatively few estates that end up paying it. However, IHT is much easier to sidestep than a lifetime gifts tax would be. Under IHT, the general principle is that outright gifts only enter the IHT calculation if they are made within seven years of death.  

If the impact of IHT on what your family or other beneficiaries will receive concerns you, now could be a good time to discuss with us the ways in which you can take advantage of the generous treatment of lifetime gifts…while it lasts.

The value of tax reliefs depends on your individual circumstances. Tax laws can change. The Financial Conduct Authority does not regulate tax advice.

To discuss how this might affect you, please contact one of our advisers on 01273 765959 or email mail@griffithsmithfm.co.uk

Griffith Smith Financial Management Limited is an appointed representative of North Laine Financial Management Ltd which is authorised and regulated by the Financial Conduct Authority. Financial Services Register No: 704336 http://www.fca.org.uk/register.

Griffith Smith Financial Management Limited Registered Address: West Wing, 47 Old Steine, Brighton, BN1 1NW. Registered in England & Wales, No. 08943379.

Neither Griffith Smith Financial Management Limited nor its representatives can be held responsible for the accuracy of the contents/information contained within the linked site(s) accessible from this page.

The Financial Conduct Authority does not regulate National Savings or some forms of mortgage, tax planning, taxation and trust advice, offshore investments or school fees planning.

The Financial Ombudsman Service (FOS) is an agency for arbitrating on unresolved complaints between regulated firms and their clients. Full details of the FOS can be found on its website at www.financial-ombudsman.org.uk

The information contained within this site is subject to the UK regulatory regime and is therefore targeted primarily at consumers based in the UK.

Please read our Privacy Statement before completing any enquiry form or before sending an email to us.