A report commissioned by the Labour party has suggested replacing inheritance tax (IHT) with a lifetime tax on all gifts from parents to their children in excess of £125,000.
According to the party, the new tax could raise £15bn in 2020/21, a tremendous £9.2bn more than what the current system earns. Under the proposals, a tax would be levied on gifts received above a lifetime allowance of £125,000.
Once this limit has been reached, any income from gifts would then be taxed at the same rate as income tax. The report stated that Labour’s plans to remove IHT breaks for main residencies is an “important interim step”.
Furthermore, the report recommended the introduction of a tax on equity withdrawals, stating that it is a “key means of avoiding inheritance tax”.
The report, commissioned by Labour party leader Jeremy Corbyn, proposed “radical but practical changes in the way land in the UK is used and governed”. However, a spokesperson for the party has emphasised that the report was not intended to be one of the party’s policies.
Author of the report, George Monbiot, recommended that some exemptions should be imposed, applying specifically to businesses and agricultural property.
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