There has been much speculation in the press recently about inheritance tax (IHT) being abolished.
It has been suggested that this could be used as a sweetener to persuade voters to choose the Conservatives in the next General Election, which will most likely be held in the Spring or Autumn of 2024.
But is that likely?
How much revenue is generated from IHT?
In the 2022/23 tax year inheritance tax raised £7.09 billion for the government coffers.
This figure has been increasing for the last three years, with a 17% increase between 2021/22 and 2022/23.
If Inheritance Tax is abolished then that revenue will need to be replaced from elsewhere.
Would an income tax increase be popular with the public?
Could capital gains tax replace inheritance tax on death – so that only increases in value of assets are taxed rather than the full value?
Who pays inheritance tax?
The public perception is that IHT is only paid by the wealthy.
This is not completely true.
Although only around 4-5% of estates pay IHT, a single person with no children will pay IHT on their net assets if their net estate exceeds £325,000.
With house prices still very high – the average house price in the South East of England is £496,942 and in London it’s a massive £728,257 according to Rightmove – many people who own a property but have little savings will find their estate potentially liable to IHT when they pass away.
However regardless of the facts it’s what the public thinks that counts and what spin the popular media put on policy decisions.
Another interesting statistic about IHT payments is that the ‘super-rich’ pay half the rate of IHT compared with the merely ‘very rich’.
It goes to show that the more money you have to invest in tax saving advice and strategies the less tax you will ultimately pay on your estate!
What else could the government do?
An alternative to abolishing IHT could be to reform it.
In recent years there have been a couple of parliamentary groups tasked to review inheritance tax and they came up with various suggestions for its reform.
To date their recommendations have fallen on deaf ears, but could now be the time to change any perceived injustices and make the tax fairer?
So, what happens next?
IHT may be abolished – and if it is there will be a lot of us very thankful.
However in my opinion it would be a brave politician who would consider this to be a vote winning policy.
Given Rishi’s well known personal wealth and negative scrutiny of his wife’s tax affairs, would he dare to pin his hopes of electoral victory on abolishing a tax considered by many to affect only the wealthy?
Only time will tell!
Blogs Related to Saving Inheritance Tax
In the meantime, and on the basis that we are hoping but not really expecting IHT to disappear, we have produced a series of blogs which should help start your journey towards avoiding or reducing tax on your estate:
Saving Inheritance Tax through Gifting
Inheritance Tax-Friendly Investments
Using Trusts to Save Inheritance Tax
How to save Inheritance Tax by using the Family Home
Getting in touch with us
If you are interested in finding out how we can help you reduce inheritance tax on your estate or that of a family member contact Jan Friend by email or on 01634 731390.
To read more about our services please see our related pages below:
The content in this blog is correct as at 14th September 2023. See terms and conditions.