Just over a week after the first budget delivered by our new Chancellor of the Exchequer, Rachel Reeves, many people in Britain are still reeling at the daylight robbery she has perpetrated. It is an overall annual tax rise of over £40 billion to take the tax burden on the long-suffering British people to the highest it has been since 1945 when we had just come out of a financially crippling war.
She may not have increased the rates of income tax but she has frozen until 2030 the thresholds at which people start paying Basic Rate tax, the Higher Rate and the Additional Rate. By means of ‘fiscal drag’ more and more people on low incomes will be drawn into paying Income Tax and more will be paying at the Higher Rate. It is fundamentally sly. This freeze until 2030 also applies to the Inheritance Tax Threshold of £325,000 which has already been frozen for at least seven years so that more and more people have been pulled into its net.
At present, married couples can pass their share of a family home on to each other free of tax so that makes a joint IHT allowance of £650,000 and each also has an additional ‘Residence Nil-Rate band’ of £175,000 so a family home valued at up to £1 million can be passed down a generation free of tax. But, given what Reeves has already done, she must surely have her eyes on this for future budgets. Or even worse - Capital Gains Tax on house sales. Why not? Left-wing ‘think tanks’ are always telling Labour politicians to do such a thing. It will be in the fore-front of her mind.
This is the woman who blatantly lied to the British electorate. None of this was in the Labour Party’s manifesto and to attempt to justify it she came up with the cock-and-bull story of there being a ‘£20 billion black hole’ in the nation’s finances. Then she proceeded to spray money about in settlement of the train drivers and the junior doctors pay disputes and award inflation-busting pay rises to other public sector groups - paying her clients for getting her elected. The ‘black hole’ then grew to £40 billion so she just had to ‘put the nation’s finances back on a sound footing’ to ‘stabilise the economy’ - never mind that no-one had noticed it wobbling.
But, amid all the other changes such as an increase in the Employers’ National Insurance Contributions which will increase business costs or the gimmick of one penny (yes, one penny!) off the tax on a pint of beer, there stands out the extension of Inheritance Tax (IHT). Not the rate of the tax, nor the threshold above which it will be paid but the drawing into the IHT net of asset classes that have been free of tax for a long time.
The first of these is Pension Funds. Hitherto, pension funds have been outside a person’s estate so attracted no tax on death. This meant that those with private pension ‘pots’ could contribute to their pensions, manage their investments and the eventual withdrawal of income so as to ensure that their pension fund would last at least until their death. At that point, the remaining fund could be inherited by whomsoever the pension fund owner chose, usually their children or grandchildren. Large enough pension ‘pots’ could therefore become inter-generational pensions.
Independent business people and professionals use such schemes. So do an increasing number of corporate employees who transferred their retirement savings out of company pensions and into Self Invested Pension Plans (SIPPs) instead. The main characteristic here is that SIPPs are private and independent and they give their possessors a great deal of choice and control over what to do with their retirement savings. Money being contributed attracts tax relief at the marginal rate so it is tax-free going into a scheme but, when it came to withdrawal time, the pension income taken out would be taxed just as any other income would be, apart from a Tax-Free Cash element which stood at 25% of the fund until quite recently.
Prior to the budget there has been much speculation about changes to the pension rules. Would it be a reduction of the relief rate given on contributions? A reduction of the maximum allowed annual contributions? A re-introduction of the Lifetime Limit on pension fund total value?
In the end it was none of these. Reeves chose to bring pension savings into the IHT net. Even although this is not effective until 2027, it is a serious blow to family wealth and inheritance plans and this, of course, is why it has been done. It is ideological as is every decision a Labour government makes. For many years independent business people and professionals have used this exemption as a part of their lifelong financial plan and IHT planning.
Younger people not yet drawing a pension can make changes to their arrangements; retired people cannot. Although it does not affect a pensioner directly it will effect their children and grandchildren. Pension pots of £1 million pounds or more are not unusual; such a pot could support an annual pension of £40,000 to £50,000 comfortably, without reducing in real value, because of investment gains. From 2027, the inheritor of such a £1 million pension pot will lose £400,000 to IHT. It is a brutal blow to people’s financial planning and their descendants’ prospects. If the same pot is passed on to a succeeding generation, it will be taxed at 40% again.
It is not difficult to see that a private pension which, carefully managed, could be multi-generational, will now be rendered virtually worthless in a couple of generations. It also creates a strong incentive to withdraw as much as possible, pay the income tax, and invest the net proceeds in something else. However, doing so will increase the risk of the fund being exhausted before the first beneficiary has expired.
This IHT raid removes a major reason for having a SIPP in the first place. Reeves and her odious party really hate the idea of people managing to be financially independent and passing their wealth on intact to their children.
And it gets worse. If someone inherits such a pension pot and wishes to immediately draw a pension from it, as they would be entitled to do if they are over 55 years old, they will pay income tax at 20% if they are a basic rate tax-payer or 40% if they pay at the higher rate. That makes the total tax rate 52% or 64%. If the recipient has an income high enough to be taxed at 45%, and he or she draws on the fund, the marginal tax rate on the inherited pension would be 67%. This is robbery. There is no other word for it.
Note that this only applies to private pensions. Those with corporate schemes based on salary levels will not be paying. Nor will public sector pension recipients be paying this tax as their gold-plated, guaranteed-by-the-taxpayer pensions die with them. So, private pensions which are subject to the vagaries of the markets will be hammered while public sector pensions (including MPs’ pensions) can be guaranteed to go on rising, in part thanks to this tax raid. This absolutely stinks. It is reprehensible.
Farmers and family business owners are being hit too. Both family farms and small businesses will also be subjected to IHT. Inheritors of family farms are unlikely to have the money lying around to pay such tax so the farms, or at least a part of them, will have to be sold. This is where we can immediately see that they are likely to be bought, not by people who wish to be family farmers, but by corporate interests which may have other ideas about what to do with the land - such as solar panels, ‘bug’ farms or simply ‘re-wilding’ it. All subsidised, of course, by our taxes. Insult to injury.
This is a serious escalation of the war on farmers and, by obvious extension, a threat to the home-grown food supply of the British people. At a time when we should be aiming to grow and rear more of our own food - Britain is apparently only 60% self-sufficient in food - this is not what we need to be doing. It is, however, perfectly in tune with the policy aims of the World Economic Forum.
If one can see that this will be the effect on family farming businesses, I put it to you, reader, that this is the intention. This is nothing to do with revenue-raising and everything to do with the implementation of UN Agenda 21. They are following orders.
Reeves knows what she is doing. So does Starmer. This is fully in line with Marxist doctrine. They know that this will destroy family farms, that farmers will be forced to sell at least a part of their land, that the diminished farms will become unviable (many barely make a living now), that there will be a knock-on effect on food production (there will be less of it). Waiting in the wings to buy will be the psychopathic international oligarchs who stalk the corridors of Davos. Oligarchs such as Gates and Fink. This is a land grab disguised as a "justifiable tax that we can't afford not to levy".
They are that evil.
However, she is not getting away with it scot-free. The day after, people began to wake up to what has been done - as this car-crash interview on “Sly News” shows. She does not handle herself well, as shown here.
In the meantime, it has become imperative that the next government of a conservative persuasion reverses these measures at the very least or, better, raises the IHT threshold to several million pounds or, best of all, abolishes this hated tax altogether. Heaven knows the last Conservative government talked about it often enough but in the end it didn’t find the courage to do it. Those who were ministers in it should be hanging their heads in shame. It is another thing for which they cannot be forgiven.
Pray we don’t have to wait too long so that not too many family farms and family businesses are wrecked.