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Labour party leader Jeremy Corbyn has proposed replacing inheritance tax with a levy on cash and property given to individuals during their lifetimes. This “lifetime gift tax” was outlined in a report, Land for the Many, commissioned by the Labour party which claims to “put land where it belongs: at the heart of political debate and discussion” and “allow for the better sharing out of the unearned windfalls arising out of the housing boom”. But what is Jeremy Corbyn’s “lifetime gift tax” and how exactly would it affect you?


What is the current system in place? Currently, the system enables parents to avoid taxes on gifts to their children as long as they are made seven years before the parent’s death. There is usually no inheritance tax paid on small gifts made out of your normal income, such as Christmas and birthday presents - these are known as “exempted gifts”. But other gifts count towards the value of your estate and therefore will be subject to inheritance tax upon your death. Anyone who gives away gifts worth more than £325,000 during the seven years before your death will be charged inheritance tax. Gifts count as anything that has a value such as money, property and possessions - and can also include the loss of value when something’s transferred, for example, if you sell your home to your child for less than it’s worth, the difference is counted as a gift. READ MORE: How much can you gift your children without incurring inheritance tax?

But there are exemptions to this taxation. You are permitted to give away £3,000 worth of gifts each tax year without them being added to the value of your estate - this is known as your annual exemption, which if unused, can be carried forward to the next year, but only for a period of one year. There are also exemptions for other payments that can be given each year, including: wedding gifts, Christmas or birthday presents, payments to help with another’s living costs or gifts to charities or political parties. Any gifts up to the cost of £250 per person can also be made without carrying a tax payment. A parent is also able to pass on a home with a value of up to £475,000 without paying inheritance tax, a sum that rises to £950,000 for married couples and civil partners. Otherwise, the standard inheritance tax rate is 40 percent and is charged for the part of your estable above the threshold of £325,000.


Jeremy Corbyn lifetime gift tax explained: The Labour report was called Land for the Many

What is the “lifetime gift tax” mean and how is it different? The plans for the new levy outlined in the Land for the Many report proposes “radical changes to the way land is used and controlled in the UK”. The proposals would slash the inheritance tax allowance to a lifetime amount of £125,000. The current average house price in the UK is more than £226,000. Once an individual exceeds the threshold, any further gifts would be classified as income and taxed annually at income tax rates.

Jeremy Corbyn lifetime gift tax explained: Jeremy Corbyn has been the Labour Party leader since 2015

As of March, the current average house price in the UK is more than £226,000. The report says: “When this lifetime limit is reached, any income from gifts would be taxed annually at the same rate as income derived from labour under the income tax schedule.” The reports outlines that the proposals could generate an extra £9.2bn for the Treasury than the current system. It suggests there should be “conditional exemptions” to the tax for commercial and agricultural property. READ MORE: Money expert claims the government with recoop more money from inheritance tax over the coming years

Jeremy Corbyn lifetime gift tax explained: Jeremy Corbyn at the Labour Party Conference in 2018

Another proposal is that a Labour government should set an explicit goal to stabilise house prices, “so that wages can catch up and the house-price-to-income ratio can gradually fall”. The report’s editor, the environmentalist George Monbiot, said: “By these means, it seeks to make this a nation that works for everyone, with a better distribution of wealth and power, greater financial stability, economic security and environmental quality, greater participation in the decisions that affect our lives, an enhanced ability to create our own homes and neighbourhoods and a stronger sense of community and belonging.” According to the report: “The reforms to Inheritance Tax ... are designed to allow for the better sharing out of the unearned windfalls arising out of the housing boom.” It added: “The higher land prices rise, the more inheritance and windfall gains overshadow the rewards of work. “For 10 out of the last 20 years, the owner of an average house in London has reaped more in annual price growth than the average full-time UK worker earns in a year.”

Jeremy Corbyn lifetime gift tax explained: Jeremy Corbyn at the Labour Party Conference in 2017

Mr Monbiot wrote: “Dig deep enough into many of the problems this country faces, and you will soon hit land. Soaring inequality and exclusion; the massive cost of renting or buying a decent home; repeated financial crises, sparked by housing asset bubbles; the collapse of wildlife and ecosystems; the lack of public amenities – the way land is owned and controlled underlies them all. “Yet it scarcely features in political discussions. “The sense that even in discussing land we are trespassing is so strong that this critical issue remains off the agenda. “Yet we cannot solve our many dysfunctions without addressing it.

Jeremy Corbyn lifetime gift tax explained: Environmentalist George Monbiot spoke about the report