Now that the worst of COVID-19 pandemic is hopefully behind us many people’s attention has been moving toward how the country is going to pay for it.
4 in 10 people fear the UK Government will increase the current 40% Inheritance Tax (IHT) rate to help cover the cost of the COVID-19 pandemic. Certainly as Swindon Will Writers, Farsight Wills have had the conversation arise often.
The findings, from research by Tower Street Finance among 2,000 UK adults, revealed more than half (54%) think the Government is set to raise the rate of IHT to 50%, three in ten fear a rise to 60% and one in seven predict it could rise to 70%.
A minority, one in 33, fear the Government could even double the IHT tax rate to 80% – The last time that occurred was just after World War II.
Inheritance Tax is currently charged at 40% on the value of an estate above the nil rate band, which as of today stands at £325,000 for an individual or £650,000 for a married couple.
In 2009/10 the Government received £2.4bn in Inheritance Tax. A decade later in 2019/20 that figure had more than doubled to £5.2bn. Although, IHT has never been part of the Government’s strategy to generate revenue it is a substantial sum and could be eyed as a possible option.
Unsurprisingly, the research shows more than four out of ten (45%) don’t believe the Government should make any changes to Inheritance Tax, or the nil rate band to pay for the Coronavirus pandemic.
However, a quarter of people do think the Government should reduce the nil rate band so more estates have to pay Inheritance Tax and a further 20% think the IHT rate should increase.
Tower Street Finance’s Managing Director Andrew Bartle said: “With historic high rates of Government borrowing during the pandemic it’s only a matter of time before the Chancellor is forced to announce tax rises.”
“Our research shows the majority of people are bracing themselves for an IHT rise – whether that’s a straight increase from the current 40 % charge or a reduction in the nil rate band, or indeed both.”
This is not the first time that changes to Inheritance Tax have been called into question. In late 2019, former Chancellor, Sajid Javid, hinted that changes could be on the way.
Additionally, past Chancellor, Phillip Hammond, ordered the Office of Tax Simplifications to conduct a review of Inheritance Tax and they published two reports outlining how the tax could be simplified. The 2021 budget announcement is imminent so we may know sooner rather than later whether changes to Inheritance Tax are on the horizon.
If you have questions about how to minimize Inheritance Tax or would just like a plain English explanation of what is involved please feel free to contact us for an informal free of charge chat.