The Labour leader’s proposal replaces inheritance tax with a “lifetime gift tax”, The Sunday Telegraph reported. The tax will apply to property or cash given to individuals during the course of their lives. The report, Land for the Many, claims it would help “the better sharing out” of “unearned windfalls”.
Labour hope the tax would add £9 billion a year to the Treasury.
The current system allows parents to avoid inheritance tax if they gift their children more than seven years before their death.
Duncan Simpson, Research Director at the Taxpayers’ Alliance (TPA), referred to the “very common method” known as the seven year rule.
Mr Simpson told Express.co.uk: “There are different ways to limit your inheritance tax liability. A very, very common one is what’s called the seven year rule.
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“So that means if you give away quite a bit of your estate to, well technically it could be anyone but it could be children, grandchildren for instance.
“If you live longer than that seven year period then your estate will not be subject to inheritance tax. If you live for four years then you would be subject to inheritance tax, but at a lower rate than 40 percent.
“So it’s tapered as each of those years go by.”
But Labour’s new plan would tax any cash or property above a “lifetime allowance” of £125,000, the paper reported.
Any further gifts which exceed the threshold would be considered as income and taxed annually.
According to OBR’s ‘Economic and Fiscal Outlook’ report released in March 2019, the Government is forecast to collect £6.3billion from inheritance tax in 2023-24.
This is a £1billion increase from last year, 2018-19, with HMRC collecting £5.3billion from inheritance tax.
The figure of £5.3billion is set to remain the same for next year, 2019-20, but is forecast to increase to £5.4billion in 2020-21.
HMRC is then expected to collect £5.6billion in 2021-22 and £5.9billion in 2022-23, according to the report.