Labour is expected to increase the amount of money it makes from inheritance tax at the Budget, according to reports.
Chancellor Rachel Reeves will set out the government’s spending plans at next week as she delivers the first Labour Budget since March 2010.
Expected to be billed as “Fixing the Foundations to Deliver Change,” both Reeves and Prime Minister Keir Starmer have spent weeks warning the public that there is a “£22bn black hole” in public finances.
According to the BBC, the Treasury is planning to increase inheritance tax to raise £40bn to help plug this hole.
Currently, inheritance tax is charged at 40 per cent on the property, possessions and money of somebody who has died above a £325,000 threshold.
Anything a deceased individual leaves to a spouse or civil partner is exempt from inheritance tax, regardless of the estate’s value.
Around four per cent of deaths result in an inheritance tax charge, as most estates fall below the threshold. At the moment this raises around £7bn a year for the government.
But the chancellor and prime minister are said to be considering multiple changes to the tax, particularly in regards to some of the exemptions and reliefs it includes.
Changes to inheritance tax would most significantly impact the wealthy, however recent polls suggest there actually isn’t widespread support for any increases to the charge.
A YouGov poll last month found that just 17 per cent of Brits believe the tax is fair, whilst 60 per cent oppose the idea of a rise.
However, in its election manifesto, Labour promised it would not “increase taxes on working people,” and specifically said it would not increase “National Insurance, the basic, higher, or additional rates of Income Tax, or VAT”.
This gives Reeves and the Treasury very few options for other ways to raise tax revenue.
The reported plans for inheritance tax have been criticised by the Conservative party, with shadow Chancellor Jeremy Hunt saying that people who had saved all their lives would “pay the price” for the measure.”
He said: “During the election we repeatedly warned that Labour’s sums didn’t add up and that they were planning to raise taxes.
“The real scandal is that despite planning these tax rises all along, they didn’t have the courage to admit it to the public during the election campaign.
“Unfortunately it looks like it will be people who have saved all their life to provide an inheritance to their family who will pay the price for Labour’s tax rises.”
Chancellor Rachel Reeves will deliver the Budget to the House of Commons on Wednesday, October 30.
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