With a new Labour Government in the UK, we take a look at reports of changes to IHT which a Labour government have suggested they will make.
What do we know?
According to reports, there are proposals to overhaul IHT, with plans for a consultation to be launched in autumn.
What may happen regarding IHT is speculation at this stage, however an option being looked at involving changes in the rules for the tax on agricultural land and trading businesses could have very serious implications for certain clients.
Currently, up to 100% relief may be available on the inheritance of agricultural or trading business assets (subject to certain conditions). Labour are reported to want to scrap this relief, which allows a person to pass on a company or shares if it is unlisted with 100% tax relief. Plans being considered are said to include a sliding scale of options, including capping the benefit from agricultural and business relief to £500,000 for each person (currently uncapped), rather than scrapping it altogether.
Wider changes were also said to be being considered on gifts, where currently these are IHT free after a donor survives seven years from the date of the gift.
Consequences for business owners
If business relief is to be scrapped, the impact for thousands of clients would be significant. An IHT liability would arise unless the business assets were transferred to a spouse or civil partner on death, which may not always be possible or the most appropriate commercial decision.
Without the reliefs, the death of a business owner could mean the death of a family-run business, as executors may be forced to sell the business to pay the IHT debt.
What is the timescale?
Financial reporters believe that HMRC could be instructed to prepare figures on a range of options as early as next month which would then go to the Office for Budget Responsibility (‘OBR’). The OBR would need around 10 weeks to do the sums and share their findings with the Treasury.
There are suggestions that a budget could come in early October.
Get in touch
We can’t say for sure what the future for IHT is. We do know is that nothing is likely to change until at least October, so it is worth considering your position now.
Get in touch to understand the tax implications of passing on your business/wealth.
