Both the Conservatives and Labour have suggested they will have to keep all major tax thresholds frozen until at least 2028 should they win next week’s General Election.
A spokesperson for business consultancy Hargreaves Lansdown, says: “Frozen tax thresholds continue their slow squeeze of our finances, with neither main party committing to releasing the pressure. The much-trailed cuts to inheritance tax didn’t make the Conservative manifesto either.
“For years, it was strongly suggested Conservatives would slash the tax, which is growing strongly, though the tax take overall remains small. Last year was a bumper year, with receipts hitting almost £7.5bn and the year has already started strongly at £1.4bn.
“If assets such as our home and savings are worth more than the IHT nil rate band (currently £325,000) and the residence nil rate band (£175,000), then our families could get hit with a bill. However, in many cases inheritance tax is not levied on SIPPs and pensions, so it’s a very tax efficient way to pass money down through the generations.
“If you were to die before the age of 75 then your beneficiaries wouldn’t pay income tax on it either, though they would if you were over 75. It’s a rule that brings essential peace of mind to know that your family won’t be left struggling should you die unexpectedly. However, there are many who believe the treatment is overly generous and we could see tweaks made in the coming years.”
Hargreaves Lansdown says it’s important to note that income tax doesn’t stop at just taxing take home pay each month. The consultancy states: “Once you’ve used your personal savings allowance, you also pay income tax on savings accounts. For those who have been pushed into the higher rate tax bracket, this doesn’t just mean paying a higher rate of tax on your savings, it also means your personal savings allowance has halved overnight to £500, so you pay this higher rate on more of your savings too.”
The wealth management service Wealth Club says that the IHT take could increase should the Labour Party win the election – a pledge to restrict non-doms from shifting money offshore is expected to raise £430m a year, equivalent to a 6% increase in the overall inheritance tax take.
It says inheritance tax has been a feature of several manifestos and campaigns this election.
Labour’s pledge is to end the use of offshore Trusts to avoid inheritance tax, generating an estimated £430m in income for the Treasury annually; while the Conservatives’ pledge is to retain inheritance tax reliefs for family farms to ensure they can be passed down without tax burdens.
Wealth Club investment manager Nicholas Hyett says: “Labour are targeting non-doms who shelter their money abroad and the Conservatives have accused Labour of harbouring secret plans to go further – with inheritance tax notably absent from the list of taxes in the Labour manifesto that will not be increased. Meanwhile Reform have promised generous inheritance tax cuts as it looks to win over voters.
“The reality is that inheritance tax would likely rise under either of the two main parties. Freezes on thresholds over the last few years, partnered with decades of house price rises have brought more and more estates into the tax band. Attempts to increase taxes on wealthy non-doms may be politically popular, but most of the tab will still be picked up by families who would not consider themselves particularly rich.
“For these families, their standard of living hasn’t changed, indeed inflation means it might have gone backwards, but frozen allowances mean the government now considers them wealthy enough to face inheritance tax.”
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A lot of it is a short term gain, in the long run as people sell their BTL’s and find ways around the other taxes…. The take will drop 👎🏻💰. Then we are in more trouble, all we seem to do is want jam today…. And not even plan for porridge 🥣 tomorrow 🤔
Well sadly there isn't enough in the coffers to pay for the public services we all want and need, so tax will have to go up one way or another. Unless they want to borrow even more, but I think they may be at the limit of borrowing. It was OK when interest rates were much lower.
Staying and working abroad, the only way I will beat the system is to stay here. Devaluation of the pound will help me in the long run but what a complete mess the country is in.
There's not enough because its expensive. Its expensive because its badly run. Services are exploited, and there's corruption at every level. So in reality, they need to be kissing our arses as we not only pay their over-exorbitant wages, but fund all the services too. Don't go feeling like we 'deserve' to be paying more taxes! We deserve to get what we're paying for, first! Right now, its like we're sat at a posh restaurant, and paying posh prices, whilst they just served you MacDonalds! Are you happy with that?
We've been lurching to the left for decades. As a result, we're not getting richer, on the contrary - per capita we're getting poorer. So, as services keep getting more expensive because the cost of living keeps going up, they have to find more more from the same pool, and so we are relentlessly squeezed, making the economy worse. When taxes get so high there's a sense its pointless working (where we've been for years) you get even worse productivity from a demotivated population.
Their answer will be to tax us until we're happy! (read, dead)
If tax thresholds were raised people would work more hours and therefore pay more tax.
It's far easier to get a medium to high earner to do more than to get the unemployed into a job that pays enough for them to be self supporting.
Just in my family (which doesn't live anywhere near London) 5 of us are affected by tax cliff edges and either rein in our efforts or dump money in SIPPs to minimise the tax take.
Eldest son is a crane operator on a big national infrastructure project. He is on well over £60K and it simply isn't worth doing overtime. Partly because he has 5 children so the loss of Child Benefit is huge.
He didn't know early enough last year about SIPPs to retain much Child Benefit so has an absolutely obscene tax bill this year. Many of his colleagues also have the same issue so major infrastructure projects run behind schedule and cost the tax payer far more than was predicted.
Middle son works for a reinforced concrete specialist and is part owner of 4 BTLs. He dumps what he can into SIPPs but is constantly short of money as he pays crazy amounts of child support and has his kids at his house at least half the week. His ex wife on the other hand works part time and rakes in UC, child support and £300 a month rent from my eldest grandson. Her standard of living is way higher than his and she pays virtually no tax.
My youngest son is childcare central so his ex wife and current partner can both work as many hours as they want. He tries to earn just below the amount at which student loan repayments would kick in. His ex wife works whatever the optimum amount is for her UC entitlement. His current partner is a psychologist and works 4 days a week to remain a basic rate tax payer. They've run the numbers and by the time travel to work costs, student loan repayments and higher rate tax is taken into account it's simply not worth working an extra day.
My husband works as a lorry driver and landlord and dumps as much of his PAYE income as possible into a SIPP. Section 24 is incredibly painful. He's seriously disillusioned with the whole landlord thing.
I work in a warehouse and as a landlord. Section 24 is likely to push me into the 60% tax band this year even though I dump every penny of PAYE income into a SIPP. I would actually like to buy more BTLs but it simply isn't viable with the current over taxation.
The main reason I favour SIPPs is so it's there to pay at least some of the IHT bill when the time comes. Isn't that a ridiculous way to live?
Vote Reform and get rid of the status quo which is not and will not do us LL’s any favours.
I would love to be able to vote Reform. However, my postal vote form hasn't arrived and I'm off on holiday tomorrow. It's outrageous to be denied a vote purely because someone is too slack to send out the forms in a timely fashion. I got the letter saying my application had been approved nearly 2 weeks ago but still no actual voting papers.
Jo - when we lived abroad because my husband was in the army, they couldn’t get our postal votes back in time! The entire British Army, serving abroad, denied a vote!
I am purposely not on the electoral roll, but was considering enrolling for this election to enable voting Reform. Too late now.
The lefties need to realise communism doesn’t work. This is why Russia and China have changed. I holidayed in Cuba a few years ago. Our tour guide was a qualified doctor but said he earned more doing this because of the tips!
North Korea is still Communist but who wants to live there! Taxing people too much kills aspiration and stifles growth.
Margaret - North Koreans may look at Britain, where men can go into women's toilets, young girls get groomed and the national flag is a source of embarrassment, and think "who wants to live there".
Everything is relative.
The Tories are basically limp wristed liberal democrats. All mouth, no action and taxation.
Virtually all Toilets in London has been closed down, maybe Local Authorities need some biology Accreditation. They don’t even know what gender they are anymore and don’t dare to question them either.
It’s a far cry from the 1960 public conveniences everywhere imagine we had them and they closed them, now it’s someone’s doorway, back Alley or Public Park.
Jo. What this about SIPPs it doesn’t apply if you are over 75.
True. It also doesn't apply to rental income.
I'm unlikely to get to 75 if family history is anything to go by so under the current regime it works for me. The biggest problem is a new government may change things.
I wish you good health you can’t go by family history my Dad passed away suddenly at 46,RIP that was 60 years ago,
Enjoy your break and don’t be thinking about houses.
I'm selling up little by little in this country and moving my assets abroad. The tax burden is stifling and you get no thanks for being patriotic. They've frozen the tax thresholds so more are being pulled into paying taxes. Inflation (caused solely by government through expansion of the money supply) is insidious and is done in such a way that the majority don't notice. I expect it to get worse , if that's possible, with labour in power.
Only reform can break this status quo.
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