Published: 02/09/2024 By Hannah Duncan
Recent developments have sparked concerns about potential changes to inheritance tax (IHT) under a Labour government. A leaked recording of Darren Jones, the shadow chief secretary to the Treasury, suggests that Labour may consider using inheritance tax as a tool to "redistribute wealth" and address "intergenerational inequality."This has raised fears that Labour might target various reliefs currently available, which enable families to reduce their inheritance tax liabilities.
Under the current system, homeowners can pass on up to £500,000 tax-free — or up to £1 million for couples — provided the family home is bequeathed to their children. There is speculation that Labour could lower or eliminate this exemption, thereby expanding the reach of inheritance tax.
Another area that could be impacted is the array of reliefs that allow individuals to transfer wealth during their lifetime without incurring inheritance tax. These reliefs are crucial for effective estate planning and minimizing tax liabilities.
It's important to note that the UK already has one of the highest inheritance tax rates among OECD countries, set at 40%. Currently, estates valued above £325,000 are subject to this tax on the amount exceeding this threshold, known as the nil-rate band. This threshold has remained frozen since 2009, pulling more estates into the inheritance tax bracket as property values have increased over time.
Given these potential changes, it is essential to review your estate planning strategy regularly to ensure that your assets are protected and that you take full advantage of the reliefs currently available. Proactive planning could help mitigate the impact of any future changes to inheritance tax legislation. Please get in touch for guidance with IHT planning.
(Source: https://www.telegraph.co.uk/money/when-will-labours-first-budget-taxes/)