Just when you thought it couldn’t get any worse, it does.
Hot on the heels of the Government’s response to the ‘IHT on Pensions’ consultation (which is still being debated and digested by the profession) we have media reports this week that Labour are actively considering yet more changes to the IHT regime!
The suggestion this time is that they could introduce a lifetime cap on gifting.
The former Labour Chancellor Roy Jenkins famously described Inheritance Tax as a “voluntary levy paid by those who distrust their heirs more than they dislike the Inland Revenue”.
Up until now that statement has been, for the most part, 100% true.
Given that we have an effectively unlimited gifting capacity at the moment, there is no size of IHT liability that cannot be effectively managed, given sufficient time and commitment.
All of that could be about to change.
The suggestion that we might see a cap on overall lifetime gifting would, if introduced, be perhaps the most significant change to the death duty landscape in the UK for decades – maybe even ever!
If the Government proceeds with these proposals, they are effectively locking families into an IHT bill. One assumes that any lifetime gifts in excess of the proposed limit would attract IHT and so, regardless of one’s resolve to do something about it, an IHT bill could become inevitable.
Now, let’s be clear, while this particular rumour does come from comments made by senior Government ministers, it does not guarantee that these proposals (or any proposals for that matter) will come to fruition. Chancellors have been known to change their minds!
However, we have to look at the stark reality of the country’s finances…
We now know that the Chancellor has a reported £50bn ‘black hole’ to fill in this year’s budget. That dwarfs even the circa £40bn raised in last year’s outing – already one of the largest tax raising Budgets on record.
Labour have committed not to raise the 3 headline rates of Income Tax, NI or VAT – these are the only 3 tax lines that could (relatively) easily swallow up that £50bn deficit. Even then, it is reported that it would take a 5p increase to income tax rates across the board to fill the gap.
While Governments have been known to break manifesto promises, for Labour to break this particular one and increase taxes on ‘working people’ would surely be political suicide of the highest order.
As such, they are left with the niche taxes to go after once again and primarily that leaves both Inheritance Tax and Capital Gains Tax (which is also reportedly being looked at for a further raid this year).
The message here is very simple and very stark…
Act Now!
While you still can!
At the moment, I can’t see any major downside in accelerating any major estate planning that people were “planning to get around to”.
So, that gift you have been thinking of making to your children or grandchildren, that trust you have been thinking about setting up. That insurance policy you were pondering. Please, for your own sake and that of your family, do it now!
