Labour Government and IHT
When a new government comes into power after a long time, it’s normal to speculate on the changes that will be made and whether they’ll impact you. With rumours of an Inheritance Tax overhaul circling and talks of a consultation to be launched in Autumn, let’s find out more about what could potentially happen. And remember, Kent tax advisors are always on hand if you’re worried and need professional advice to protect your assets going forward.
Changes to IHT Relief
Firstly, it’s important to note that much of what will happen is pure speculation at the moment. There’s no way of knowing exactly what Labour will do until they announce firm plans. However, it’s predicted that the government will make changes to IHT for agricultural land.
As it stands, a person can claim up to 100% relief on the inheritance of agricultural land if it’s being actively farmed. Labour reportedly wants to get rid of this as well as business relief, which allows a person to pass on a company or shares if it is unlisted with 100% tax relief.
Tightening of IHT rules in this way could have a significant impact on SMEs and other family businesses. IHT liabilities would arise unless business assets were transferred to a spouse or civil partner on death. As this is not always possible, the death of a business owner could mean a family-run business would need to be sold just to pay the IHT bill.
Relief might not be scrapped altogether, however – if at all. Rumours suggest that caps might instead be introduced for agricultural and business relief instead of abolishing relief completely. The only thing we can do at the moment is to wait and see.
Getting your affairs in order is also wise. Professionals such as Nick Hughes can advise on estate management and business planning, as well as helping those with non-dom status and/or overseas assets to ensure their wealth is managed effectively.
Ending the Use of Offshore Trusts to Avoid IHT
Another clue as to what the new Labour government might do with IHT can be found in their manifesto. While this mentions Inheritance Tax only once on page 21, it’s stated that Labour will ‘end the use of offshore trusts to avoid Inheritance Tax.’ This is rather vague considering offshore tax avoidance reforms have already been made in recent years, making their use much less beneficial for all UK domiciled people. The benefits of offshore trusts for non-domiciled individuals have been reduced too, especially with regards to residential property – but remain widely used. Perhaps we will see tighter regulations on trusts being classified as excluded property for IHT. Such changes would largely affect people not living in the United Kingdom.
Changes to IHT Rules on Gifts?
Inheritance Tax is widely known as one of the most hated taxes. This is why many people seek out estate planning experts that can help reduce IHT liability. One of the best ways to do this is to make gifts to family, friends and charities. Currently, no IHT is due on gifts if they’re made by a person who lives for more than seven years after the gifts are made. There’s talk of this changing with the Labour government – but again, it’s only speculation at present. If someone does pass away in the meantime with a large estate subject to IHT, a Kent accountant for probate services can help resolve all outstanding issues.
As the new Labour government settles in, it’s a good idea to keep abreast of any changes to IHT laws that might arise.
