We have waited and waited for the sort of sweeping inheritance tax changes promised by Gordon Brown when he was in opposition – to abolish potentially exempt transfers, to reform business and agricultural property reliefs, and to reintroduce graduated rates of tax – but they have still not arrived.
This year’s miserly increase in the threshold at which inheritance tax becomes payable from £231,000 to £234,000 (just under 1.3%) surpasses – in its blandness – the largely technical changes to inheritance tax introduced in Labour’s first two Budgets.
Whether Gordon Brown has had a change of heart on inheritance tax, has had his hands tied by Tony Blair, or is biding his time pending a radical overhaul remains to be seen. However, for the time being, the words of Labour’s Policy Review for the 1990s that “only the ill-advised and the negligent now face effective taxation on wealth” remains mostly true.
If Gordon Brown has been reluctant to amend inheritance tax legislation, the same cannot be said of capital gains tax. Having announced the abolition of indexation and retirement relief for individuals in his 1998 Budget, this year’s Budget has seen a radical liberalisation of taper relief (their replacement), as it applies to business assets.
Taper relief for business assets
For disposals after 6 April, 2000, taper relief
for business assets is now to be calculated over a four-year period, as opposed to a 10-year time span.
The bonus year for assets held before 17 March, 1998 is to be dropped. (The box below explains how relief will now be given.)
The qualifying voting thresholds for shareholdings in trading companies (previously 25% or 5%) will also be reduced from 6 April, 2000 so that the following will qualify as business assets:
*All shareholdings in unquoted trading companies;
*All shareholdings by employees in quoted trading companies; and
* Shareholdings in a quoted company, where the holder is not an employee but can exercise at least 5% of the votingrights.
