Labour ‘looking at’ plan to slash inheritance tax threshold, John McDonnell says

Shadow chancellor says party could introduce new system, cutting minimum tax-free inheritance from £475,000 to £125,000

Labour is “looking at” introducing new inheritance rules, which would slash the minimum threshold for paying tax on wealth passed from generation to generation, John McDonnell has revealed.

The shadow chancellor said his party was interested in reforming the current inheritance model, in an attempt to create a fairer system.

He said the if the party was in government, it would consider introducing a lifetime gifts tax, which would cut the current minimum tax threshold on inheritance from £475,000 to £125,000.

“We are looking at it,” Mr McDonnell told Sky News’ Sophy Ridge on Sunday programme when asked if he was “attracted to the idea” of scrapping inheritance tax and replacing it with a different system.

“It might be one of those ideas and we are consulting on it at the moment... I think it’s interesting.”

“We need to have a fairer system of how we can ensure that wealth is more fairly distributed – that’s one idea and we are listening to a whole range of ideas.”

However, the suggestion has been criticised by Conservatives, with party vice-chairman Marcus Jones describing the idea as a “siege on homeowners”, claiming it would prevent parents passing on homes to their children.

“John McDonnell has yet again confirmed Britain’s homeowners would be under siege with another Labour tax raid on people’s homes,” he said.

“Labour’s new gift tax proposals would slash the inheritance tax threshold meaning families up and down the country would be hammered, simply for passing their property to their loved ones.

“Only the Conservatives are committed to lowering taxes and helping people achieve home ownership through our policies such as Help-to-Buy and cuts to stamp duty for first time buyers.”

Mr Jones said current inheritance tax rules affect 640,000 households each year but claimed 10 million would be affected under a lifetime gifts tax.

However, Labour say the 10 million figure is too high because only 63 per cent of homes are owner-occupied.

Additional reporting by PA