Alterations in Inheritance Tax Thresholds and Stricter Enforcement of Gift Regulations Proposed by Reeves
Title: UK Government Explores Changes to Inheritance Tax Rules Ahead of Autumn Budget
In the lead-up to the upcoming Autumn Budget, the UK government is considering several changes to Inheritance Tax (IHT) rules in an effort to boost revenue. According to Charlene Young, a senior pensions and savings expert at AJ Bell, the government is currently collecting more in death taxes than ever before, with IHT takings more than doubling in a decade.
One of the proposed changes involves adjusting the IHT threshold. The current threshold of £325,000, at which point inheritance tax begins to be applied, could potentially be lowered. This move would increase the number of estates subject to IHT, thus generating additional revenue for the government. However, it is important to note that this remains speculative and has not been confirmed by the government.
Another area under scrutiny is the rules regarding gifts. The government is considering introducing a lifetime cap on tax-free gifts, meaning that gifts exceeding a certain limit (e.g., £100,000) could be subject to IHT. Additionally, there is speculation that the exemption period for gifts could be extended from 7 years to 10 years, making it more difficult for individuals to avoid IHT by forcing them to consider longer-term estate planning strategies.
Darren Jones, Rachel Reeves' Treasury deputy, has defined 'working people' as anyone who receives a payslip, as the government seeks to increase revenue from IHT. Instead of adding a new exemption or increasing the existing ones, the chancellor is set to slash exemptions for IHT. The proportion of estates paying IHT is back at the same level seen before the introduction of the RNRB (Residence Nil Rate Band).
The Labour Party's 'Stability Rule' aims to fund all day-to-day government spending solely by tax revenue by the end of the decade. To comply with this rule, the Treasury needs to collect more than £50bn in new taxes at the next Autumn Budget. In light of these financial requirements, the government's efforts to increase revenue might also involve revising other tax areas, such as capital gains tax, as part of broader fiscal strategies.
In summary, the UK government is exploring options to adjust IHT rules, including changes to thresholds and gifting rules, to enhance tax revenue ahead of the Autumn Budget. These potential changes could impact a significant number of estates and may require individuals to reconsider their estate planning strategies. It is important for individuals to stay informed about these developments to ensure they are prepared for any changes that may be implemented.
[1] Source: Unnamed government official, as reported by The Telegraph [2] Source: Charlene Young, senior pensions and savings expert at AJ Bell [3] Source: HM Treasury spokesperson, as reported by The Guardian
