Speculation that Labour is planning to scrap or restrict a number of tax reliefs that exempt certain assets from Inheritance Tax, while the Tories ponder scrapping IHT altogether, create a gathering cloud of uncertainty for both fledgling businesses and investors, warns Jason Hollands, Managing Director of investment platform Bestinvest.

Hollands said: “Recent weeks have seen considerable speculation over the future of inheritance tax at a time when receipts from this tax are at an all-time high, reflecting the corrosive effect of a nil rate band that has been frozen for 14-years. On current trajectory, increasing numbers of estates are set to fall into IHT, generating a bonanza for the tax man as the post-war ‘baby boomers’ pass away.

“Views on IHT are polarising. It is often identified as a widely hated tax, which in the eyes of some is tantamount to graveyard robbery. Others argue it can help to address inequality.

Hollands continued: “If recent speculation turns out to be true, then the two main Westminster parties are set to map out very different positions in the run-up to the fast-approaching General Election. However, on either of the mooted scenarios – a crackdown on IHT exemptions, or the reduction or scrapping of IHT altogether – there is a serious threat to a key source of financing for fledgling UK growth companies being choked off. This leaves both potential investors and small businesses caught between a rock and a hard place until policy positions become clear.”

Business Relief was originally introduced in 1976 with the aim of preventing family-owned business being decimated by having to pay a significant IHT bill on the death of the owner. The relief reduces the value of qualifying assets as part of a deceased persons estate for IHT purposes. The assets must have been owned for two year and is assessed on death.

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