Rishi Sunak is planning to eliminate IHT reliefs, exemptions, and incentives – why?
Why is Rishi Sunak trying to repeal IHT exemptions, exclusions, and incentives?
If the estate of someone who has died and is passing on their assets is worth more than £325,000, IHT is usually paid. A range of benefits and reliefs are accessible due to the costs, although Rishi Sunak may remove them in the next months.
When inheritance tax is due, it is paid at a rate of 40%, and as a result, it can eat up a significant percentage of a family’s inheritance. HMRC has provided data on how much IHT contributes to the government’s coffers, emphasizing the cost.
On August 20, HMRC released figures showing that the government collected £2.1 billion in IHT between April and July 2021.
This was a £500 million gain over the previous year’s similar period.
“The £0.5 billion increase in IHT receipts year on year is unsurprising,” said Nick Ritchie, RBC Wealth Management’s Director of Wealth Planning.
“Rising property prices and investment markets have increased the volume and value of estates caught in the IHT net, and the Chancellor’s decision to freeze the zero rate band until 2026 appears to confirm this trend.
“At the same time, many people have moved forward with their plans to leave something to the next generation as a result of mortality fears driven by the pandemic, as well as concerns about how the Chancellor might target larger estates in the future,” says the report.
While the IHT rate is unlikely to be increased, Mr Ritchie added that other aspects of the tax could be targeted in the coming months to cover coronavirus-related expenses.
“One thing is certain: with an IHT rate of 40%, already among the highest in the OECD, focusing on IHT will not be the silver bullet for reducing the mounting deficit,” he said.
“While hiking the IHT rate seems unlikely, increasing collections by eliminating or reducing reliefs, focusing on lifelong gifts, or eliminating the substantial capital gain exemption on death could all assist.
“Rather than risk being caught off guard by tighter laws in the future, individuals may wish to consider implementing their wealth transfer strategy sooner, while current, tried-and-true rules are still in place.”
According to Money Helper, lowering the amount of IHT paid on an estate is a challenging task.
“Brinkwire Summary News,” in a nutshell.