Chancellor Jeremy Hunt may postpone announcing changes to inheritance tax (IHT) as the levy is a growing revenue raiser for Government coffers.
There were reports the top taxman could reduce IHT rates or set out plans to bin the tax altogether in tomorrow’s autumn statement, but bumper tax receipts may sway him to put off any such changes.
IHT receipts from April to October reached £4.6billion, up £0.5billion compared to last year. Income from the levy increased 17 percent in 2022 compared to the year before.
Jack Gill, managing director of Final Duties, said: “There were hopes that we might see a cut to inheritance tax in this week’s autumn statement, although these hopes seem to have now faded, with the Government more likely to focus on other tax incentives to better boost their popularity ahead of the next general election.
“This is disappointing given that inheritance tax is arguably no longer a tax on the wealthy and more and more of us face falling foul of it as our estates grow in value and become liable.
“This is largely due to the overstimulation of the property market in recent years which has pushed house prices to record highs. With property forming the majority of the average person’s estate, the increase in the value of their property is pushing them into inheritance tax territory.”
Julia Peake, tax and estate planning specialist at Canada Life, also warned Britons they may be liable to pay the tax.
She said: “We may see changes to IHT pushed down the road to the Spring Budget next year, so if no changes are announced in the autumn statement, don’t be lulled into a false sense of security that inheritance tax won’t apply to you.
“Though generally house prices may have fallen in recent months, this is not the case for the whole country. While your house will take up a large proportion of your available nil rate bands, IHT is calculated on the whole of your net estate, which includes savings, investments and other assets owned by you, which are not exempt or held in a trust, as well as gifts made in the last seven years.”
Inheritance tax applies to any total inherited assets above the value of £325,000 when inheriting an amount from a single person or above £650,000 from a couple.
There is an additional nil rate allowance when the deceased’s main residence is being inherited – £175,000 for a single person or £350,000 for couples.
A person can reduce the IHT liability of their estate by giving away tax-exempt gifts. An individual can give away up to £3,000 a year divided between any number of people, as well as any number of gifts up to £250 to different people.
A person can give away a larger amount but they will need to survive for seven years for this amount to avoid the tax.
People can also arrange for their assets to be put into a trust which will separate them from their estate for IHT purposes.
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