Chancellor Jeremy Hunt could announce changes to inheritance tax in the Spring Budget as more people become liable for the 40 percent tax. There were rumours the Chancellor would announce changes to the tax or even scrap the policy, in the recent Autumn Statement, but there was no update on the levy.
Jon Sullivan, inheritance tax expert at Wesleyan, said: “After being left out of the Autumn Statement, inheritance tax is seemingly back in the crosshairs.
“While the future remains to be seen, what’s for sure is that the continued uncertainty around the tax means people will be deferring decisions about how to pass on their money – a delay that could have negative outcomes given that inheritance tax is, to a degree, time-sensitive.
“On balance, the scale of IHT exemptions has grown considerably since 2005. Even so, IHT receipts continue to rise – up £400million year-on-year by the latest figures – and more and more estates are finding themselves with tax bills to pay.”
Rising house prices in recent years and the rising value of other assets have meant more estates becoming liable for the tax.
This doesn’t always have to be the case. IHT is a tax that can be managed, and families must make sure they’re seeking proper advice to avoid a situation where their loved ones are paying it unnecessarily.
Susannah Streeter, head of money and markets at Hargreaves Lansdown, said there have been fresh rumours the tax could be axed entirely.
She said: “It is certainly a tax in need of reform, and it is highly likely to be targeted for upheaval in March. Nil rate bands and gifting thresholds have remained untouched for years.
“At the same time, there’s been a rapid growth in house prices which has meant that many people who may not have expected to be liable for IHT now are.
“This year, we’re expected to pay £7.6billion in IHT, but with the same thresholds and rate in place, by the end of the 2028/29 tax year, it’s forecast to be £9.8billion.”
A survey of 2,000 married UK adults conducted by OnePoll on behalf of Wesleyan found two in five married UK adults have not spoken to their children about their inheritance arrangements.
A quarter of respondents had not agreed who should inherit their estate or how it will be split when they die.
Mr Sullivan said: “We would like to see some of the complexity removed from the system, particularly around trusts and the application of the relevant property regime.
“If an increase to the nil rate band could be funded, it wouldn’t just benefit deceased estates, it would also increase the amount that could be placed into trust tax free, and help smaller trusts remain outside of periodic charging.”
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