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The Labour Party has unveiled ambitious plans to dramatically lower the UK’s Inheritance Tax (IHT) threshold if the Party wins the General Election on 8 June.
Shadow Chancellor John McDonnell has said that Labour would lower the existing threshold to just £425,000 for couples – a move which could see hundreds of thousands of UK family homes attract the 40 per cent levy.
The move would see the current maximum tax-free allowance – which was recently increased to £850,000 for couples who leave family homes to direct descendants – halved in a bid to ‘raise up to £1bn’ for the public purse.
Commentators have estimated that more than half of homes in the City of London would pay more IHT under the proposals, while elsewhere only the ‘very grandest’ properties would attract higher bills.
Justifying the plans, Mr McDonnell told a BBC radio interview that the Labour Party would be “reversing Conservative giveaways” of recent years.
A shadow Treasury spokesperson added: “Labour do not support the Inheritance Tax giveaways announced by the Conservatives, as according to their own figures only 26,000 fewer estates would have no tax liability in 2020-21 [under existing plans], at a cost of almost £1bn.
“Labour will set out in detail our priorities on taxation in the coming weeks when we announce our manifesto, but we believe in a fair tax system that stands up for the many, not the few,” they added.
In opposition, the Conservative Party has branded the plans “nonsensical”.
Jamie Romer, of OGR Stock Denton’s Private Client Team, said: “As Inheritance Tax is already a significant factor in the South East, careful consideration of the adverse effects of this policy needs to be taken into account”.