Latest news with #inheritancetax
Daily Mail
3 days ago
- Business
- Daily Mail
Is Keir already lining up his next U-turn? Starmer faces fresh rebellion from Labour MPs over his 'family farm tax'
Sir Keir Starmer has been put on notice of a fresh Labour rebellion over the Government's 'family farm tax'. More than 40 Labour MPs are said to be considering a bid to water down looming changes to agricultural and business inheritance tax relief. It comes after the Prime Minister performed a trio of embarrassing U-turns in recent weeks. Sir Keir has reversed his position on axing the winter fuel payment for millions of pensioners, a national grooming gangs inquiry, and welfare cuts. This has left Labour rebels feeling emboldened that they can force the Government into further policy changes. According to the Telegraph, a group of Labour backbenchers are considering using amendments to legislation to exempt small family farms from a planned tax raid. At last year's Budget, Chancellor Rachel Reeves announced farmers will pay a 20 per cent rate of inheritance tax on land and property they inherit worth more than £1million. The Government has insisted the measures - dubbed the 'family farm tax' and set to be in place from April 2026 - will only affect the wealthiest quarter of landowners. But the National Farmers' Union (NFU) and others say the impact of Ms Reeves' measures will be much more widespread. Critics claim the move could wipe out family-run farms with tight margins, as they will be forced to sell up in order to pay death duties. There have been months of demonstrations by farmers in response to the Chancellor's tax raid, including tractor protests in Wesminster. A 'rural growth group' of Labour MPs is now proposing the raising of the £1million cut-off point at which estates lose their tax reliefs. They have suggested estates receive full tax relief on the value of agricultural properties up to £10million, 50 per cent to £20million, and nil thereafter. Sam Rushworth, Labour MP for Bishop Auckland, who is a member of the group, told the newspaper they would 'consider what amendments to put down'. Mr Rushworth said: 'We are all keen to avoid amendments. I don't want it to get to that point. I am a Labour MP and I broadly support the Government. 'I would like to see them bring forward different recommendations in the Bill.' Ex-Cabinet minister Louise Haigh, who was a leading rebel over the Government's now partially-reversed welfare cuts, has called for Sir Keir to 'reset' his relationship with the British public. 'I think this is a moment and an opportunity to reset the Government's relationship with the British public and to move forward, to adopt a different approach to our economic policy and our political strategy,' she told the BBC in the wake of the PM's climbdown on welfare changes. 'And I think that has been accepted from within government and a lot of people, both in the parliamentary Labour Party, but crucially, the country will really welcome that.' The Government's original welfare package had restricted eligibility for Personal Independence Payment (PIP), which is the main disability payment in England. It also cut the health-related element of Universal Credit. But, after Sir Keir offered concessions to rebel MPs, the changes to PIP will now only be implemented in November 2026 and apply to new claimants only. All existing recipients of the health element of Universal Credit will also have their incomes protected in real terms. A Government spokesman said: 'Our reforms to agricultural and business property relief are vital to fix the public services we all rely on. 'Three quarters of estates will continue to pay no inheritance tax at all, while the remaining quarter will pay half the inheritance tax that most people pay, and payments can be spread over 10 years, interest-free. 'We're investing billions of pounds in sustainable food production and nature's recovery, slashing costs for food producers to export to the EU and have appointed former NFU president Baroness Minette Batters to advise on reforms to boost farmers profits.'
Telegraph
24-06-2025
- Business
- Telegraph
‘My mum gave me her house while still living there – do I owe capital gains tax?'
Email your tax questions to Mike: taxhacks@ Dear Mike, I expect you will be inundated with gripes, but mine is slightly different. In short, our mum gave her house to me and my brother but carried on living in it for a further 20 years. House prices then increased before we sold it. I told my accountant and he said we had to pay capital gains tax on the increase. I asked whether her living in it might negate the whole thing but he said HMRC would not recognise the transaction for inheritance tax, but would for capital gains tax. My mum's estate was smaller than the inheritance tax allowance. I moved accountants a few years later and mentioned what had happened. This accountant took the view that I shouldn't have paid the capital gains tax but that I would now probably be 'out of time' to appeal. Nevertheless, he thought an argument might be made. I appealed to HMRC and, after waiting a year, received a letter saying I was indeed out of time, at least implicitly accepting that a claim would otherwise have been accepted. Isn't it unethical of HMRC to keep my money in this way? – Gordon Dear Gordon, This is a trap which I have unfortunately seen several people fall into. I appreciate that this was not the case for your mother but sometimes parents give their home to their adult children hoping to save on inheritance tax. This does not work because by continuing to live in the property they fall into the 'reservation of benefit rules' which means that the property remains in their estate for IHT purposes. Unless the children are also living there, the gain has no protection as a principal private residence (PPR); capital gains tax is due on the sale price less the market value when you received it from your mother. It appears that was the advice from your first accountant. However, as I suspect your second accountant was implying, there is another way that PPR can be available. Where a property is held in a trust, often called a settlement, a separate exemption can be claimed if the person living in the property is entitled to do so under the terms of the trust. This is explained in the HMRC manuals here. In normal cases with personal ownership, this relief from capital gains tax is given automatically. With a trust, however, the trustees have to make a claim to HMRC, and do so within four years from the end of the tax year of the sale. This raises two questions: was there a trust involved and, if so, was a claim for capital gains tax relief made in time? Most of us assume that a trust only comes into existence through either a document prepared by a solicitor or under the terms of a will. However, there are more ways of creating a trust. An 'express' trust can be created where three conditions are satisfied, as explained in the manuals here. This does not necessarily need to be in writing although where property is concerned it must be evidenced in writing. An 'implied' trust can come into existence through the operation of established legal principles, as explained here, including who provided the funds. There have been some recent cases on the legal issues involved as summarised in the HMRC manuals here. These were not tax cases but the legal principles reviewed are nevertheless relevant. The key issue is whether documentary evidence exists to show the background to your mother's gift of the property to you. She may, for example, have written letters to each of you explaining her plans. I imagine that she arranged the transfer of the property to you with the help of a solicitor and you may still have the papers stored in a safe somewhere, possibly at the bank. I realise that this was 20 years ago but the solicitors involved may have retained the relevant paperwork. Since this is essentially a legal issue, I asked Gary Rycroft, The Telegraph's consumer law columnist, for his thoughts. He said: 'If you have evidence as to the intention by all parties involved for your mother to still live in the house after the gift, that would be useful. Also factual evidence that she paid expenses such as council tax, or that she was named as occupier on the home insurance would point to her living there with the permission of yourselves as the legal owners.' If this hurdle could be overcome, the next issue is whether you have made a claim in time. There are some circumstances where HMRC will relax the time limit for making claims, such as where someone works overseas and retains a property in the UK. However, the four-year time limit arises from the general rule on claims and I am not aware of any guidance to inspectors to accept late claims. A claim is treated as made when it is received by HMRC, not when it is signed, dated or posted, as stated here. You say that HMRC took a year to respond to your letter but I am not sure whether this letter confirms when HMRC received your claim. You have asked about the ethics of HMRC sitting on your money. We receive many comments from readers complaining about delays in HMRC dealing with correspondence. I received a letter a few weeks ago in response to a claim I made last September, but it did at least contain an apology. However, I do not believe that anybody at HMRC deliberately sat on your letter until it went out of time, and as long as the post was timed on arrival it would have made no difference anyway. What I assume happened is that by the time you made your claim you were already outside the four-year window. I can understand your frustration but that is just the way the law works. Mike Warburton was previously a tax director with accountants Grant Thornton and is now retired. His columns should not be taken as advice, or as a personal recommendation, but as a starting point for readers to undertake their own further research.
Telegraph
20-06-2025
- Business
- Telegraph
Inheritance tax is heinous, but avoiding it could be a bigger disaster
They say nothing in life is certain but death and taxes, but I propose to add a third to the list: investors doing everything imaginable to avoid taxes. The bigger the bite HMRC wants, the heavier the hustle to shield hard-earned assets. Thanks to Labour dragging pensions into the inheritance tax net, it is now a stampede. Yet the avoidance path conceals huge pits I've watched investors fall into throughout my 50 years managing money. Estate planning is wonderful, but too often, sensible planning leads to tax considerations dictating investment decisions. This raises risk, reduces returns and can hit your planned inheritance much harder than any tax rise. Consider popular ways people now seek to shield pensions from inheritance tax: investing in Aim shares is one, with the double benefit of stamp duty exemption and business property relief. Enterprise Investing Schemes (EIS) are another, and business property relief schemes letting you access unlisted companies is a third. All these sprang from past governments' investment incentives, hoping to spur entrepreneurship and startups. A fine aim. But pursuing a strategy aimed at these incentives solely for tax benefits aren't the sunlit uplands some promise. You don't need me to tell you Aim has a long history of scandals and failures alongside those select success stories that graduated to the main market. Or that its stocks are Britain's tiniest, with a median market capitalisation of £15m. Or that FTSE's Aim All Share is down nearly -30pc since 2000, while the FTSE All Share has soared over 275pc. Astronomical missed returns are a dear price to pay for tax relief, particularly one whose relief is rapidly diminishing – Aim stocks' BPR relief drops from 100pc to 50pc next year. EIS and BPR schemes carry another risk: overloading on unlisted companies. These sport the veneer of stability and, in EIS's case, supposedly high growth potential. They are billed as a way for normal folks to invest in venture capital and reap big rewards when a startup hits it big, but the reality is those are needles in a haystack of hard-to-value, illiquid investments. Winners aren't guaranteed – untraded doesn't mean stable. It just means fewer pricing points, hiding the inherent behind-the-scenes volatility. That is illiquidity – a bug, not a feature. You risk being unable to sell when you really need to without suffering a steep discount. Aim companies aren't categorically horrid. Some are fine, even great. EIS and BPR can also be fine tools, in certain situations. But it all depends on your broader goals and time horizon, which gets us to the root of the problem. Your fixation on tax steers you away from why you invested in the first place. Done right, long-term investing is about picking the correct asset allocation – the blend of stocks, bonds and other securities – for reaching your goals over your investment time horizon. Your goals are the primary purpose for your money, usually growth, cash flow or some combination of the two. Your time horizon is how long your money must last, usually your lifetime – clearly longer if inheritance tax is a concern. Throughout history, stocks and bonds have done a marvellous job of delivering the growth and cash flow people need, given a sufficiently long-term horizon and reasonable withdrawals. Stocks deliver abundant long-term growth, despite bear markets and volatility along the way, while bonds cushion expected short-term volatility and support cash flow with interest. British and global listed stocks and bonds are liquid – easy to sell in a pinch to cover expenses both expected and sudden. When tax avoidance takes supremacy, will you let it steer you from whichever liquid asset allocation aligned with your goals and needs? If your pension is loaded with Aim shares, EIS or BPR schemes to reduce inheritance tax, it risks not delivering the returns needed to support your cash flow later on. Aged poverty is a real pain. Or maybe your pension ends up worth vastly less for your heirs, after tax, than if you had opted for a simple blend of stocks and bonds. If you have a sudden expense, your pension may not be liquid enough to cover it. Then what do you do? Borrow? Don't forget, tax policy is a whack-a-mole game. Pensions were exempt from inheritance tax until they weren't. After halving Aim relief in 2024's Budget, Labour capped BPR last year. Some ministers floated scrapping Aim relief altogether. What then? If you focus on tax optimisation, you may find yourself needing to make big changes again. And again. And again. Changes cost money. Taxes are certain in general, but the specifics are shape-shifting. When your goals and time horizon determine your strategy, there are fewer moving parts. You can build a diversified strategy with a long history of delivering what you need, while taking sensible steps to reduce tax exposure where available. Tax avoidance is nice. Liquidity, predictability and reaching your goals? Nicer.
Yahoo
19-06-2025
- Business
- Yahoo
Treasurer's huge call on tax changes
Treasurer Jim Chalmers has announced his ambition for economic and tax reform, and while he remains tight lipped about what's on the table, he has ruled out two key changes. Speaking to the National Press Club on Wednesday, the Treasurer announced the government will hold a productivity roundtable from August 19 to 21 for the purpose of seeking ideas for reform from business, unions, civil society and experts. The gathering will be capped at 25 people and held in Parliament House's Cabinet room. 'Obviously there are some things that governments, sensible, middle of the road, centrist governments like ours don't consider,' Mr Chalmers told The Conversation's Michelle Grattan. 'We don't consider inheritance taxes, we don't consider changing the arrangements for the family home, those sorts of things.' Mr Chalmers said he believes limiting the narrative to 'ruling things in or ruling things out' has a 'corrosive impact' on policy debate, but conceded to ruling out the historically controversial taxes. Inheritance tax is a tax you pay on assets inherited when you are the beneficiary of a will. While inheritance taxes used to be common in most states, by 1981 all Australian states had abolished them. The GST was another key tax eyed for the roundtable. Mr Chalmers has historically opposed lifting the GST but is facing increasing pressure from the states to do just that. The GST has remained at 10 per cent for 23 years. 'You know that historically I've had a view about the GST,' Mr Chalmers told the Press Club. 'I think it's hard to adequately compensate people. I think often an increase in the GST is spent 3 or 4 times over by the time people are finished with all of the things that they want to do with it.' Mr Chalmers said he hadn't changed his view on GST and he won't walk away from it but stressed he's open to hearing ideas on the issue at the roundtable. 'I've, for a decade or more, had a view about the GST,' he told The Conversation. 'I repeated that view at the Press Club because I thought that was the honest thing to do, but what I'm going to genuinely try and do, whether it's in this policy area or in other policy areas, is to not limit what people might bring to the table.' Two years ago, Mr Chalmers warned that raising the GST would likely not fix federal budget issues since even though the tax was collected by the federal government before it was distributed back to the states. 'From my point of view, there are distributional issues with the GST in particular. Every cent goes to the state and territory governments, so it wouldn't be an opportunity necessarily, at least not directly, to repair the Commonwealth budget,' he said. One thing that will remain in play though is the government's pledged superannuation changes, that would increase tax on investment returns, including interest, dividends or capital gains, on balances above $3 million. 'What we're looking for here is not an opportunity at the roundtable to cancel policies that we've got a mandate for; we're looking for the next round of ideas,' he said. 'I suspect people will come either to the roundtable itself or to the big discussion that surrounds it with very strong views, and not unanimous views about superannuation. 'But our priority is to pass the changes that we announced, really some time ago, that we've taken to an election now, and that's how we intend to proceed.' Mr Chalmers said the idea of extending the capital gains tax on superannuation balances to other areas had not been considered 'even for a second'. Sign in to access your portfolio
News.com.au
19-06-2025
- Business
- News.com.au
Treasurer Jim Chalmers rules out two key tax reforms
Treasurer Jim Chalmers has announced his ambition for economic and tax reform, and while he remains tight lipped about what's on the table, he has ruled out two key changes. Speaking to the National Press Club on Wednesday, the Treasurer announced the government will hold a productivity roundtable from August 19 to 21 for the purpose of seeking ideas for reform from business, unions, civil society and experts. The gathering will be capped at 25 people and held in Parliament House's Cabinet room. 'Obviously there are some things that governments, sensible, middle of the road, centrist governments like ours don't consider,' Mr Chalmers told The Conversation's Michelle Grattan. 'We don't consider inheritance taxes, we don't consider changing the arrangements for the family home, those sorts of things.' Mr Chalmers said he believes limiting the narrative to 'ruling things in or ruling things out' has a 'corrosive impact' on policy debate, but conceded to ruling out the historically controversial taxes. Inheritance tax is a tax you pay on assets inherited when you are the beneficiary of a will. While inheritance taxes used to be common in most states, by 1981 all Australian states had abolished them. The GST was another key tax eyed for the roundtable. Mr Chalmers has historically opposed lifting the GST but is facing increasing pressure from the states to do just that. The GST has remained at 10 per cent for 23 years. 'You know that historically I've had a view about the GST,' Mr Chalmers told the Press Club. 'I think it's hard to adequately compensate people. I think often an increase in the GST is spent 3 or 4 times over by the time people are finished with all of the things that they want to do with it.' Mr Chalmers said he hadn't changed his view on GST and he won't walk away from it but stressed he's open to hearing ideas on the issue at the roundtable. 'I've, for a decade or more, had a view about the GST,' he told The Conversation. 'I repeated that view at the Press Club because I thought that was the honest thing to do, but what I'm going to genuinely try and do, whether it's in this policy area or in other policy areas, is to not limit what people might bring to the table.' Two years ago, Mr Chalmers warned that raising the GST would likely not fix federal budget issues since even though the tax was collected by the federal government before it was distributed back to the states. 'From my point of view, there are distributional issues with the GST in particular. Every cent goes to the state and territory governments, so it wouldn't be an opportunity necessarily, at least not directly, to repair the Commonwealth budget,' he said. One thing that will remain in play though is the government's pledged superannuation changes, that would increase tax on investment returns, including interest, dividends or capital gains, on balances above $3 million. 'What we're looking for here is not an opportunity at the roundtable to cancel policies that we've got a mandate for; we're looking for the next round of ideas,' he said. 'I suspect people will come either to the roundtable itself or to the big discussion that surrounds it with very strong views, and not unanimous views about superannuation. 'But our priority is to pass the changes that we announced, really some time ago, that we've taken to an election now, and that's how we intend to proceed.' Mr Chalmers said the idea of extending the capital gains tax on superannuation balances to other areas had not been considered 'even for a second'.
