The Treasury is viewing estate tax as one of the ways to raise more cash before the fall budget as Labor tries to bridge the gap between income and spending up to £40 billion.
Officials are studying the rules that pass the gift of currencies and assets, although no decisions have been made, according to the Guardian.
One way to explore is the hat of a lifetime gift.
Currently, gifts for seven years before someone dies are not paid for estate tax, while gifts for three to seven years before death are taxed on a sliding scale called “taper relief” with a tax rate reduced from 32% to 8% per year.
Lifetime limits can be introduced to limit the amount or value of assets an individual can donate as part of their inheritance tax program, and the Ministry of Finance is also reviewing rules on taper rates.
“Since there is a lot of wealth stored in assets such as valuable houses, we must find ways to better utilize the inheritance of those who are able to contribute more,” a person familiar with the matter told the newspaper.
“It’s hard to make sure these taxes don’t create loopholes that disrupt their purpose. However, we’re working to figure out what income might be raised and how to ensure that this is a fair way.”
The estate tax is a worrying tax as estates worth over £325,000 should bear 40% of the tax, adding more estates every year due to the freezing threshold and rising property prices.
However, according to the latest HMRC data, only 4.6% of deaths caused this tax between 2022 and 2023.
“People think the government is exploring the total value of a one-time gift that people can earn in their lifetime under the “potential tax-free transfer” rule.
“The fact that people have to be able to afford the money and often does not involve handing over family residences is considered part of the appeal because it avoids targeting those whose wealth is kidnapped in property.”
Coles added: “The government can also explore taper relief, which applies if the fees you give out before death exceed zero tax rates, and the tax rates you pay gradually drop between three to seven years after the gift.
“This means higher risk to the tax bill on the estate, which means they are not less than their families after their death.
“This will introduce the system to the edge of the cliff so that a person who sincerely gives gifts and dies in just seven years will be attacked by huge tax bills.”
Prime Minister Rachel Reeves (pictured) hopes to insert public finance this fall without undermining the Labor declaration assurance that no taxes on the “working people” are covered by state insurance, income tax and VAT.
