Inheritance tax could be the first tax to rise as the Government looks to get money back into its coffers, said leading tax and advisory firm, Blick Rothenberg.
Robert Pullen, a partner at the firm, said: ‘The Government were already turning their attention to inheritance tax, even before the pandemic and it is now likely one of the taxes that the Chancellor will use to get money back into the exchequer.
‘It is possible that the Government could increase inheritance taxes across the board, or slash the allowances. Interestingly, it was after World War II when inheritance tax was eventually cranked up to 80%. While such an increase now might be unlikely, it is likely that the tax will be changed to generate more revenue.’
Robert added that: ‘Inheritance tax brings in around £5.5bn per year and, thanks to the fiscal drag of freezing the nil rate band – the 0% threshold for inheritance tax at £325,000 since April 2009, this has resulted in an increase to the number of estates paying inheritance tax , up to 67% since 2009.
‘A consultation is currently ongoing looking at reforming the tax, and follows a report from 2019 by the Office of Tax Simplification. Possible suggestions mooted in the consultation were around reducing some of the annual allowances, changing the qualifying criteria for businesses and agricultural assets to get relief, and removing the CGT base cost uplift on death in some situations. A more extreme report was published in February by the All-Party Parliamentary Group, which proposed a range of measures including introducing a lifetime tax of 10%.’
Robert noted that: ‘As the Government continues its unprecedented support for individuals and businesses, and reports indicate the budget deficit could soon be a whopping 15%, the highest since the end of World War II, it is looking at how borrowing will need to be repaid, inheritance tax is a prime candidate as it is outside the tax lock (for income tax, VAT and NIC). This is likely to be one of a number of tax increases as the UK begins to grapple with the task of repaying the huge debt pile created by the crisis.’
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