Whilst the Covid 19 pandemic rumbles on, with the furlough scheme set to come to an end on 30 September and the various relaxations in restrictions across the whole of the UK, economic recovery must be top of the Chancellor’s agenda. It won’t come as a surprise then that tax hikes and reforms will be part of the overall plan and it appears that Inheritance Tax (“IHT”) is a specific target in Rishi Sunak’s campaign, as Government insiders reportedly warn that “we’ve got to start paying the bill for this pandemic”.
According to a recent Treasury Report, a rise in IHT would be a “politically sound move, as it would not disproportionately hit lower income families, and could be presented as a wealth tax”.
Following on from our blog in November 2020 (https://blog.aab.co.uk/investigating-inheritance-tax-hmrc-haul-hits-four-year-high) highlighting increased Inheritance Tax (“IHT”) revenues as a result of a surge in HM Revenue & Customs investigations, recent figures show IHT receipts between April to June 2021 were £1.5bn, an increase of £0.4bn compared to the same period last year. With IHT proving to be an increasingly lucrative source of funds, it seems likely that it will play some part in the Chancellor’s overall recovery plan.
This is not unexpected and comes on the back of calls for a wider review of the IHT system as also briefly discussed in our November blog. It is not yet clear how this hike in IHT would be effected. A blanket rise in the IHT rate, already set at a fairly unpalatable 40%, seems unlikely as it flies against the recommendations in the recent IHT Reform Consultations. It is perhaps more likely that the Government will overhaul or potentially even abolish various valuable IHT reliefs and allowances, meaning that more taxpayers will fall within the remit of the tax both during lifetime (on making gifts) and on death.
If you have any questions or would like to find out more information, please get in touch with Lisa Tait, Private Client Senior Manager
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