Wealthy Britons are accelerating gifts to family members due to concerns about potential changes to inheritance tax (IHT) rules under a possible Labour government.
Concerns about potential changes to inheritance tax ( IHT ) rules under a potential Labour government are driving a surge in wealthy Britons gifting their money to family members. Tax advisors report an increase in such transactions, fueled by speculation that Rachel Reeves , the Shadow Chancellor, might make IHT more burdensome. The seven-year rule, which exempts gifts from IHT if the giver lives for seven years after making them, is a particular point of anxiety.
Rumours that this rule could be extended to 10 years, or even abolished entirely, have prompted many to accelerate their gifting plans. Ian Cook, a chartered financial planner at Quilter Cheviot, notes that extending the rule would significantly complicate estate planning for families, especially given the UK's ongoing retirement savings and housing challenges. He emphasizes that the primary driver behind the increase in gifting is a widespread unease about the broader tax landscape and the fear of future tax hikes or stricter regulations.While the current IHT rate is a flat 40 percent on estates exceeding £325,000, various loopholes often result in a significantly lower effective rate. The Chancellor has recently tightened tax breaks for agricultural land and business property relief. The first £1 million of such assets will now be exempt, with any amount exceeding that taxed at 20 percent, half the standard IHT rate. Despite this, many farmers argue that while they possess substantial assets, they lack sufficient liquidity to meet potential tax liabilities, leading them to consider selling their properties. Mr. Cook advises his clients to fully utilize existing allowances and consider strategic gifting, as the cost of inaction could be substantial if IHT rules become more stringent. Although currently only 4 percent of estates face IHT, projections from the Office for Budget Responsibility suggest this figure will rise to 10 percent by 2030. Mr. Cook advocates for simplifying the IHT system, including removing outdated reliefs and introducing more consistent policies to ensure fairness, accessibility, and reduce reliance on complex estate planning strategies
Inheritance Tax IHT Gifting Labour Party Rachel Reeves Estate Planning Tax Law
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