CORBYN’S AFTER YOUR INHERITANCE
Labour plots tax raid on middle class families who help children get on the housing ladder
LABOUR faced a ferocious backlash last night after it was accused of plotting a mammoth tax raid on middleclass parents who help their children get on the housing ladder.
A report commissioned by the party suggests replacing inheritance tax with a ‘lifetime gifts tax’ on cash or homes that parents give to children.
It would see children paying income tax on everything their parents give them above a value of £125,000 – less than a third of the current inheritance tax threshold.
The blueprint, contained in the report entitled ‘ Land for the Many’, suggests the proposal would allow the ‘better sharing out’ of ‘unearned windfalls’ – and would generate an extra £9billion per year for the Treasury.
The report also outlined controversial plans to replace council tax with a new ‘progressive property tax’ that would target larger homes with gardens.
The ideas are not yet official Labour policy. But last night the party said it would consider the proposals as part of its policy development ahead of the next election.
The fact that the plans are even being considered will prompt fears among parents that children will be taxed on financial assistance given to them during their lifetimes, including financial help to buy a home.
More and more children are reliant on the ‘Bank of Mum and Dad’ to help them put together a deposit. Yesterday, Paul Scully, vice chairman of the Conservative Party, said: ‘This is yet another Labour tax raid in Corbyn’s war on homeowners.
‘It would slash the inheritance tax threshold to £125,000, meaning the vast majority of homes would be hit by Corbyn’s tax grab.
‘Only the Conservatives are committed to helping people achieve homeownership through our policies such as Help-to-Buy and cuts to stamp duty for first-time buyers.’
Tory ex-Cabinet minister Priti Patel added: ‘Corbyn’s Labour have no respect for the millions of people across the country who work hard to provide economic security for themselves and their families.
‘Labour’s disregard of people, their rights and freedoms is exactly why socialism never works and it will never work in Britain.’
The current system allows parents to avoid inheritance tax if they have passed on gifts to their children more than seven years before their death. When their parents die, their children pay inheritance tax of 40 per cent above a threshold of £475,000.
The threshold, raised under then chancellor George Osborne, can be as much as £950,000 for married couples and civil partners.
Under the plans drawn up for Labour, once an individual exceeds the £125,000 threshold any further gifts would be classified as income and taxed annually at income tax rates. As of March, the average UK house price was £226,798.
Even if a parent does not give anything to their children during their lifetime, offspring are likely to pay more tax when they die because the threshold is far lower.
The report said: ‘The reforms to inheritance tax are designed to allow for the better sharing out of the unearned windfalls arising out of the boom. The higher land prices rise, the more inheritance and windfall gains overshadow the rewards of work.
‘For ten out of the last 20 years, the owner of an average house in London has reaped more in annual price growth than the average full-time UK worker earns in a year.’
It added: ‘The Resolution Foundation estimates that taxing gifts through the income tax system would raise £15billion in 2020/21, £9.2billion more than the current inheritance tax system, and would do so more progressively.’
Under the plans, there would be conditional exemptions for business and agricultural property. Tax could be deferred until the asset is sold or until the business ceases to be a trading entity and becomes an investment entity. This would allow families to maintain the integrity of agricultural land or business assets but would prevent children from gaining large tax-free windfall gains.
The report said: ‘Since implementing a lifetime gifts tax may take time, Labour’s plans to reverse the Conservative government’s recent inheritance tax break for main residences is an important interim step. Further, we recommend that a tax be introduced for equity withdrawals, which is a key means of avoiding inheritance tax.’
When the report was published earlier this month, Labour frontbencher Jon Trickett said: ‘For too long, people across the country have had little or no say over the decisions that affect their communities and the places in which they live. So much of this can be traced back to the broken system of land ownership.
‘Concentration of land in the hands of a few has led to unwanted developments, unaffordable house prices, financial crises and environmental degradation.
‘Labour is committed to tackling these head on and delivering a fundamental shift in wealth and power from the few to the many.’
‘A war on homeowners’