The man with his hands on the UK purse strings, chancellor Gordon Brown, is to introduce a new 'stealth tax' on life assurance payouts, according to a newspaper report.
The Daily Mail claims that the fine detail of Mr Brown’s inheritance tax revamp, announced in the recent budget speech, will result in many UK citizens facing a government raid on their life assurance payouts.
The changes to the laws regarding tax on inheritance will enable the Treasury to tax life policy payments that previously could have been protected from such an act, the report says.
The new rules introduces a tax of 6% on life assurance payouts above the inheritance tax threshold of GBP285,000. It applies to payouts which are channeled into trusts as a way of avoiding paying inheritance tax at 40%.
The move is so concerning to the insurance industry in the UK that the Association of British Insurers has written to Revenue & Customs to protest about the new system, the newspaper reported.
In the face of stiff opposition the government has played down the significance of the change, suggesting it will bring in just GBP15 million to the Treasury. However industry analysts argue that the new system will deliver hundreds of millions for the government purse.