Rishi Sunak will announce his first Budget as Chancellor on Wednesday – less than a month after replacing Sajid Javid in the top Government role. Inheritance tax is paid on the estate (such as property, money and possessions) of a deceased person. The standard tax rate is 40 percent, and is charged on the part of the estate which is above the threshold. This threshold is currently £325,000, however, some people may have an increased threshold. If everything above the £325,000 threshold is left to a spouse, civil partner, a charity, or a community amateur sports club, then there is normally no inheritance tax to pay.
In 2018/19, the Treasury raked in £5.4billion from inheritance tax, and this 2019/20 financial year the tax is expected to break all records with a projected £5.6billion taken from grieving families.
Mr Javid had hinted inheritance tax could be scrapped under radical proposals from the Conservative Party Government amid growing calls for huge reforms.
But Mr Sunak is looking to hit out against well-off Britons who attempt to dodge inheritance tax by clawing back £1billion from them in the Budget.
The Chancellor is understood to be looking for more money to fund Boris Johnson’s desire for an increase in post-Brexit infrastructure spending, and is considering scrapping two tax reliefs used as loopholes by rich families.
Budget 2020: Boris Johnson has been issued a warning over not scrapping inheritance tax
Budget 2020: Rishi Sunak will announce his first Budget as Chancellor
Agricultural Relief and Business Property Relief allows rich Britons to pay less inheritance tax if they set up a business or buy land which can be inherited after death. The reliefs can protect 50-100 percent of money invested from inheritance tax.
If the Treasury were to end Business Relief, they could rake in an approximate £480million a year, while scrapping of Agricultural Relief would bring in £320million.
The Bow Group said the government might actually increase inheritance tax rather than decrease it, but warned this would be a “grave error”.
The political think tank told Express.co.uk: “The Government is rumoured to be planning to close down certain allowances related to inheritance tax.
Budget 2020: The Chancellor could announce major changes to inheritance tax
“These principally relate to allowances for people to pass on businesses tax free when they die. It is therefore likely the Conservatives may use their huge majority to actually increase inheritance tax rather than reduce it, which would be a grave error.
“The Bow Group has consistently encouraged the Government to completely scrap inheritance tax in all forms, as it is a tax on wealth that has already been taxed generally levied on people in a time of mourning.
“The Conservative Party must listen to its voters and supporters and get on with scrapping grossly unfair taxes like inheritance tax. If they don’t their majority will be short lived.”
The TaxPayers Alliance also lashed out at inheritance tax, and called on Mr Sunak to at least treble the threshold to which it is paid.
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Budget 2020: Sajid Javid had been due to oversee the Budget
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Research Director Duncan Simpson said: “The Chancellor should remember that inheritance tax is detested by the public because it’s unjust and hugely inefficient.
“It is a double tax that punishes people for leaving money to their family and is fiendishly complex.
“The ultimate solution would be to scrap it altogether. For now, the chancellor ought to consider raising the threshold on which it is paid from £325,000 to £1 million, sparing 25,000 families from paying the death tax.”
Institute of Economic Affairs (IEA) senior academic fellow Prof Philip Booth said while scrapping inheritance tax is unlikely, the Government could make two key changes that would see millions of Brits completely exempt from it.
Budget 2020: Conservative Cabinet reshuffle
He told this website: “Inheritance tax is a levy on thrift and a tax on savings from income that has already been taxed when earned. Even Sweden has abolished their inheritance tax.
“The Government could do one very straightforward thing which would make a big difference: increase the tax-free limit to £1m for a couple and get rid of the special treatment of houses.
“That would allow significant simplification of the system and take huge numbers of people out of the tax altogether.”
Budget 2020: Boris Johnson is under pressure to scrap inheritance tax
The Centre for Policy Studies warned Britons that while there are “a lot of problems” with inheritance tax, they should not expect huge changes in the Budget, but urged the Conservatives to at least stick to a promise the party made in its general election manifesto.
Senior Researcher James Heywood said: “Inheritance tax is one of the most unpopular taxes and there are a lot of problems with the system as it stands, but there doesn’t seem to be any sign of wholesale reform on the horizon.
“The Government’s tax priority should be lowering the burden on the lowest paid, including raising the employee’s National Insurance threshold as proposed by the Centre for Policy Studies and promised in the Conservative manifesto.”
Published at Thu, 05 Mar 2020 12:49:00 +0000