Despite amounting to around £7bn a year, Inheritance Tax (IHT) is only being paid by 4% of estates and accounts for just 1% of tax. The largest revenue generators continue to be Income Tax, National Insurance and VAT. So, for a tax that only affects a small proportion of the public – and makes such a modest contribution to UK tax receipts – IHT is perhaps an odd choice for political debate.
Earlier this year The Telegraph, backed by a reported 50 Conservative MPs, launched a campaign to abolish the tax claiming it was inherently unfair. And, with the government’s Autumn Statement looming and the election deadline of 2024, we can probably expect to hear much more about what the different parties consider to be ‘fair taxation’ over the coming months.
In an attempt to re-elect the incumbent political party, one rumour that is already circulating in the press concerns the possible abolition of IHT. That would certainly be popular amongst wavering Conservative voters as it would enable more wealth to be retained within families. However, if IHT were abolished, it’s bound to have a knock-on effect to Capital Gains Tax (CGT). Could the CGT-free uplift on death be abolished? A proposal that was once suggested by the now disbanded Office of Tax Simplification. The Labour Party have a history of increasing capital taxes and, if elected, it is rumoured they may alter the eligibility criteria for some IHT reliefs such as Agricultural Property Relief (APR) and Business Property Relief (BPR).
Tax planning can only be based on the tax rules that exist at the time advice is given, it should not be based on speculation over possible future changes in our tax laws heard in the pub, read in the newspaper or created in artificial intelligence (AI) sources such as ChatGPT. Unfounded rumours can cause families to delay their IHT and Estate Planning.
It is difficult to imagine that we will ever return to a pre-1694 era of tax-free wealth transfers on death, but it is likely that some changes will occur in the next year or so – whoever takes on the reins as chancellor. Read more about our Estate Planning and Inheritance Tax Services HERE.
In the meantime, please do contact us on 01223 810100 to discuss your future plans for the succession of your business and other assets. We will, of course, keep you informed of any changes in tax legislation that may affect those plans, as matters unfold.
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