Could the House of Lords potentially shift the government's stance on debated revisions to inheritance tax laws?
The British government has announced plans to reform inheritance tax (IHT) regulations, with significant changes set to take effect from 2026. These reforms have sparked controversy and criticism, with several organizations and financial experts voicing their concerns.
One of the key changes is the restriction of agricultural property relief. Starting from 6 April 2026, the relief will be limited to the first £1 million for estates containing farmland and assets. Landowners above this limit will pay IHT at a reduced rate of 20%, rather than the standard 40%. This restriction also applies to combined agricultural and business property reliefs.
Another contentious proposal is the inclusion of pensions in an estate for IHT purposes from 2027. This move has raised concerns among bereaved families, who may face a significant administrative burden due to the need to settle the IHT bill within six months.
The government's decision to scale-back agricultural and business reliefs as part of the IHT reforms has not gone unchallenged. Rachel Vahey, head of public policy at AJ Bell, has proposed an alternative solution: applying income tax on withdrawals from inherited pensions at the marginal rate of the beneficiary if the person dies before age 75. This, she argues, would raise the same amount for government coffers while avoiding the administrative frustration, delays in payment, and concerns for bereaved families that the current set of proposals threaten to cause.
The government's IHT reforms are currently going through Parliament in the draft Finance Bill, with many changes already in motion. Peers from across the chamber are looking for views on plans to make unused pension funds part of a person's estate for IHT, and the House of Lords Finance Bill Sub-Committee has launched an inquiry into the changes.
The opposition to these reforms is not limited to the financial sector. The organization "Die jungen Unternehmer" has declared resistance against the planned IHT reforms in an open letter to the Finance Ministry. In a joint letter, the chief executives of several financial companies also opposed the plans.
Despite the criticism, the government remains steadfast in its push for these reforms. The Chancellor, Rachel Reeves, has announced that these changes are necessary to address perceived inequalities in the current system.
As the debate continues, the House of Lords has a crucial role to play in scrutinizing the government's IHT overhauls and assessing the impact, complexity, and awareness of these changes, as well as how easy it will be for those affected to report and make arrangements for funding the IHT due within the statutory six-month period.
Read also:
- Catastrophe at a U.S. Steel facility in Pennsylvania results in the loss of two lives. crucial details unveiled
- Manipulating Sympathy: Exploiting Victimhood for Personal Gain
- Prices remain a concern for the Germans
- Auto Industry Updates: Geotab, C2A, Deloitte, NOVOSENSE, Soracom, and Panasonic in Focus
