Labour consider inheritance tax rise in further raid on middle classes
The Labour Party is considering raising inheritance tax in a further raid on the middle classes, The Telegraph understands.
The party could axe a measure that allows parents and grandparents to leave their homes and other assets worth up to £1 million entirely tax-free to younger generations.
A change to inheritance tax would come on top of other plans by Labour, including reversing the Government’s plan to abolish the lifetime cap on tax-free pension savings and cancelling tax breaks for private schools. A rise in capital gains tax is also on the table.
The Labour Policy Forum, which has been conducting a consultation on policies to feed into its next manifesto, has received several submissions from Labour branches and constituency Labour parties calling for inheritance tax to be reviewed.
Labour’s “grey book”, which it published alongside its last manifesto in 2019 to explain how it would fund its spending commitments, pledged to reverse George Osborne’s inheritance tax cut.
Reversing George Osborne’s tax cuts
The party is yet to announce which measures it will keep ahead of the next election. However, Sir Keir has already said he intends to pursue his predecessor Jeremy Corbyn’s policy of axing the financial benefits that private schools derive from their charitable status.
In 2015, Mr Osborne, the then chancellor, announced plans to cut inheritance tax, with a promise to protect millions of family homes from the “death duty”.
The plan, which took effect from 2017, honoured a long-standing Conservative promise to cut inheritance tax, which Tories said was blocked by the Liberal Democrats during the previous coalition government.
A Labour Party spokesman said the 2019 manifesto is “ancient history” – yet declined to rule out whether the policy on inheritance tax would feature in their next major policy announcement.
But a Labour frontbench source said: “We have boxed ourselves into ‘we are more fiscally responsible than the Tories’ corner – we will have to tax more or where is the money coming from if not borrowing?
“We are most likely to take on the second homes tax and reversing the George Osborne inheritance tax cut policies. We like anything that benefits people over a million quid.
“The liberal middle class Remain people will agree and be happy to pay a bit more tax. And we are also trying to win back the working class by pitting the rich against them”.
Earlier this week Sir Keir and Yvette Cooper, the shadow home secretary, refused to rule out an increase in capital gains tax after being publicly confronted about their plans.
Research by the Taxpayers’ Alliance, which modelled the impact of a possible rise in capital gains tax, found that it could result in a £21 billion (0.66 per cent) reduction in economic growth over the next decade.
John O’Connell, chief executive of the TaxPayers’ Alliance, said: “We have to remember that capital gains tax discourages investment, and without investment the economy will continue to stagnate.
“What’s more, most capital gains have already been taxed before, meaning that aligning the rates with income tax doesn’t actually level the playing field.”
A Labour spokesman said: “As Keir Starmer has made clear, Labour is under new leadership and the electorally disastrous 2019 manifesto is ancient history.”