As Mc­Don­nell sig­nals plan to cut chil­dren’s in­her­i­tances, Tories say mil­lions will be hit

Daily Mail - - Front Page - By Daniel Martin Pol­icy Ed­i­tor Turn to Page 2

LABOUR was ac­cused of plot­ting a raid on the mid­dle classes last night af­ter John Mc­Don­nell sig­nalled ma­jor re­forms to in­her­i­tance tax.

The Shadow Chan­cel­lor said he was in­ter­ested in re­plac­ing the cur­rent levy with a ‘life­time gifts tax’ on cash or homes given to chil­dren.

He claimed the plan, which the Tories say would affect 10 mil­lion house­holds, could en­sure ‘wealth is more fairly distribute­d’. At present, the in­her­i­tance tax thresh­old is £475,000, or £950,000 for cou­ples. Only 640,000 house­holds end up pay­ing the tax each year.

But a life­time gifts tax (LGT) would see each child pay­ing tax on ev­ery­thing their par­ents gave them – ei­ther dur­ing their lives or af­ter their deaths – above £125,000. The

two chil­dren in a typ­i­cal fam­ily would, there­fore, only be able to in­herit an es­tate worth £250,000 tax-free. Once an in­di­vid­ual ex­ceeds the thresh­old, any fur­ther gifts would be taxed an­nu­ally at in­come tax rates.

As of March, the average UK house price was £226,798.

Last night, the Tories warned Land Reg­istry data showed as many as 10 mil­lion prop­er­ties would po­ten­tially at­tract a tax bill if they were passed on.

Mr Mc­Don­nell’s hints came on a week­end of tur­moil for Labour as:

Union boss Len McCluskey launched a Trump- style at­tack on the Press for re­port­ing claims Jeremy Cor­byn was too frail to be prime min­is­ter;

Labour’s Brexit civil war deep­ened, with Mr Mc­Don­nell urg­ing the party to back a sec­ond ref­er­en­dum;

Front­bencher An­gela Rayner said she was ‘em­bar­rassed’ over Labour’s fail­ure to get to grips with anti-Semitism;

Chris Wil­liamson, who said Labour had apol­o­gised too much over the is­sue,

‘Ham­mer­ing fam­i­lies across the coun­try’

faced the threat of de­s­e­lec­tion from his Derby North seat.

The Mail re­vealed the in­her­i­tance tax plan last month af­ter de­tails were found in a re­port com­mis­sioned by Labour. But yesterday was the first time a top Labour fig­ure said they were ac­tively con­sid­er­ing it as a pol­icy.

Asked about the LGT idea on Sky News, Mr Mc­Don­nell said: ‘We are look­ing at it and it might be one of those ideas, and we’re con­sult­ing on it at the mo­ment.

‘I think it’s in­ter­est­ing. We need to have a fairer system of how we can en­sure that wealth is more fairly distribute­d, that’s one idea and we are lis­ten­ing to a whole range of ideas.’

Tory Party chair­man Bran­don Lewis said: ‘ This shows the true shock­ing ex­tent of Cor­byn’s tax raid on homes. Over 10 mil­lion would be caught by Labour’s new tax grab, ham­mer­ing fam­i­lies across the coun­try. Only the Con­ser­va­tives be­lieve in low­er­ing taxes and help­ing peo­ple achieve home­own­er­ship.’

Labour in­sisted the pro­posal was not yet for­mal pol­icy. It also said sug­gest­ing it would affect 10 mil­lion house­holds was too high, be­cause only 63 per cent of homes are owner- oc­cu­pied.

The Tories hit back, say­ing the own­ers of rented homes would still have to pay LGT.

The idea is con­tained in a re­port, Land for the Many, com­mis­sioned by Labour front­bencher Jon Trick­ett.

Mr Mc­Don­nell ruled out an­other de­mand in the re­port – for cap­i­tal gains tax to be charged on all house trans­ac­tions. The re­port, co-au­thored by en­vi­ron­men­tal­ist Ge­orge Mon­biot, said LGT would gen­er­ate an ex­tra £9 bil­lion a year for the Trea­sury. It prompted fears chil­dren will be taxed on fi­nan­cial help given to them by their par­ents dur­ing their life­times, in­clud­ing to buy a home.

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.

‘In the long term, we rec­om­mend that in­her­i­tance tax should be abol­ished, and re­placed with a life­time gifts tax levied on the re­cip­i­ent.

‘ Un­der this system, tax would be levied on the gifts re­ceived above a life­time al­lowance of £125,000.

‘When this life­time limit is reached, any in­come from gifts would be taxed an­nu­ally at the same rate as in­come de­rived from labour un­der the in­come tax sched­ule.

‘The Res­o­lu­tion Foundation es­ti­mate tax­ing gifts through the in­come tax system would raise £ 15 bil­lion in 2020/ 21, £9.2 bil­lion more than the cur­rent in­her­i­tance tax system.’

The re­port went on: ‘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.’

A Labour spokesman said last night: ‘We wel­come this in­de­pen­dent re­port by a group of ex­perts and will consider the rec­om­men­da­tions, which are not party pol­icy.

‘As the re­port makes clear, Bri­tain is a deeply un­equal coun­try and we need to start talk­ing about that.’

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