Pension pots 'in crosshairs' of Labour tax raid in Autumn Budget
A pension tax raid is on the cards for the upcoming Budget, analysts claim
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Pension pot are "in the crosshairs" of a potential tax raid by the new Labour Government in the upcoming Autumn Budget, analysts claim.
Chancellor Rachel Reeves has previously said "tough decisions" will need to made to plug the £22billion "black hole" in the public finances left by the last Conservative Government.
It is understood that inheritance tax (IHT) and capital gains tax (CGT) reform is on the agenda once Reeves addresses Parliament on October 30.
IHT is levy on the estates of those who have passed away, including their money, possessions and property, and is charged at 40 per cent on those valued above the £325,000 threshold.
In comparison, CGT is a tax on profit when someone sells an asset that has gone up in value. The gain made is taxed, not the money received. When someone dies, capital gains tax is only paid when an asset is disposed of.
Tax relief is available to people in certain circumstances which can reduced their liability to pay these charges which may be on the chopping block later this month.
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Older households could be hit with a pension tax raid
PANotably, the Institute for Fiscal Studies and Resolution Foundation have suggested implementing a restriction on Business and Agricultural Property Reliefs.
Furthermore, the think tanks have floated bringing defined contribution pension pots into the calculation of estates for IHT purposes.
Analysts have cited these proposals as being the most likely to be introduced in an attempt to generate more revenue for HM Revenue and Customs (HMRC)On top of this, experts from Evelyn Partners have noted that "charging capital gains on the valuation of assets at death" may also be an option.
For the 2023/24 tax year, the Treasury earned a whopping £7.5billion in inheritance tax receipts.
This is twice as much as what was earned a decade ago, with the tax intake rising in recent years due to the Government's decision to freeze the nil-rate band.
Tax receipts are running about 9.4 per cent higher so far in this tax year than last.
Ian Dyall, the head of estate planning at Evelyn Partners, shared: "The taxation of pension pots at death looks like it’s in the crosshairs at the Budget now.
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Rachel Reeves is understood to be considering raising inheritance tax (IHT), capital gains (CGT), fuel tax, and taxes on pensionsPA"Just a year ago the talk was all about whether the Conservatives would cut or even abolish inheritance tax.
"But the tables have turned on death duties in the last 12 months, and particularly since the General Election, as Downing Street has admitted the need for more tax rises.
"Rachel Reeves is not short of encouragement from think-tanks, a couple of which are keen that IHT 'loopholes' should be closed, or that wealthy families should be prevented from making the most of certain reliefs.
"The problem is, one person’s loophole is another’s legitimate relief – or in the case of some family businesses, another’s lifeline."
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