There’s strong opposition (69% of the public) to increasing the current 40% rate at which inheritance tax is levied, a YouGov poll commissioned by law firm Kingsley Napley shows
Indeed, the majority of the British public (64%) favour raising the £325,000 threshold at which the tax must be paid.
The Labour Party is expected to raise taxes to plug the so-called ‘£22 billion black hole’ in public finances, while Chancellor Rachel Reeves has refused to rule out changes to inheritance tax.
James Ward, partner and head of private client at Kingsley Napley, said: “Speculation is rife that Rachel Reeves will introduce changes to the IHT regime on 30th October. However, I think the steps she will take will be more detailed than just simply altering the nil rate band or the tax levy rate.
“She could look at removing the CGT uplift on death, for example, where there is currently a zero charge to Inheritance Tax, to remove the excess income exemption or to bring pension pots into estates for IHT purposes. She may target AIM shares and some agricultural reliefs. There have also been reports of her looking to remove the residence nil rate band exemption.
“Although an increase in VAT or income tax would do far more to help plug the ‘black hole’, her manifesto has prevented her going down that route, so curbing exemptions around Inheritance Tax is one of the few options open to her. If she does incorporate suggestions such as these, she could yield up to £2bn in revenue according to IFS** estimates.”
“And whilst increasing IHT overall remains unpopular across all voters and age groups, she could potentially justify changes that target wealth passing between generations on fairness grounds.”
He added: “Of course, the reality is that IHT is paid by less than 10% of UK estates, mostly in London and the South-East, delivering a total £6bn in revenues. However, an increase of £2bn by selective measures is not to be sneezed at. Those who may be impacted should act fast to take prudent estate planning steps ahead of 30th October.”
