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Wealthy landowners are hastily transferring their estates to their children ahead of the general election, driven by fears that a Labour government might tighten inheritance tax reliefs.
Joseph Adunse, a partner at Moore Kingston Smith and adviser to landed estate owners, has said that concerns about potential tax bills have prompted many to expedite property transfers. “There’s obviously concern about whether or not there is enough funding for Labour’s plans. People do and have given away some assets and wealth in readiness for any changes, effectively to reduce the value of estates that will potentially be within scope,” he explained.
Under the current rules, inheritance tax is charged at 40% on estates valued over £325,000, increasing to £500,000 if a home is left to children or grandchildren. Agricultural property relief offers up to 100% relief from inheritance tax for those passing on farmland and farmhouses, while business property relief provides similar benefits to prevent businesses from being sold or split up upon the owner’s death.
In 2021, Rachel Reeves, the shadow chancellor, indicated that Labour might review “every single tax break” if they came to power, including reliefs for farmers. However, shadow Defra secretary Steve Reed confirmed last December that the party does not plan to change inheritance tax rules that prevent farms from being divided upon the landowner’s death. Despite this, a recent report from the Institute for Fiscal Studies (IFS) recommended abolishing certain tax reliefs, including agricultural and business exemptions, to raise £3bn for the economy. The report suggested that capping these reliefs at £500,000 per person could generate an additional £1.8bn in tax revenue by 2029-30.
Adunse noted that individuals with significant wealth, particularly those with estates valued at more than £20m, are scrutinising the rules closely. Gifts given away during a person’s lifetime are typically exempt from inheritance tax, provided they are made more than seven years before death, while transfers between spouses are always exempt.
A recent survey by accounting firm Saffery and Historic Houses revealed that over half of property owners with estates worth more than £1bn view minimising tax as the primary reason for succession planning. This surge in estate transfers comes after a record year for inheritance tax receipts, driven by tax threshold freezes and rising home values. Figures from HM Revenue and Customs showed that receipts for the tax increased by nearly 14% this April compared to last year, bringing in £700m.
