The coronavirus crisis has had a devastating impact across the globe, with hundreds of thousands of people now sadly having died from COVID-19. The pandemic has had an impact financially too, with millions of people in the UK already having experienced pay cuts.
In response to the crisis, Chancellor of the Exchequer Rishi Sunak has announced a number of support packages – including the Coronavirus Job Retention Scheme (also known as the furlough scheme) and the Self-Employment Income Support Scheme (SEISS).
The cost of the measures are well into the millions in total, with economists warning borrowing could soar past £100billion following the crisis.
Due to the pandemic, it’s suggested Britain is facing an economic downturn not seen since the end of World War Two.
While the Chancellor has not yet specified exactly how the costs of the pandemic will be covered, there’s speculation that changes to a number of taxes are ahead.
But, will this include Inheritance Tax?
Express.co.uk spoke to Jonathan Scott, tax partner at Haines Watts, about whether there may be changes to IHT in the future.
Sharing his thoughts, Mr Scott said: “There has been lots of talk about simplifying the IHT system, but given all that is going on this might be pushed down the Government’s agenda.
“In recent years, there have been lots of think tanks saying that IHT is ‘unfit’ for modern society and should be scrapped.
“However, the Government will be looking to cover the cost of all financial support it has been handing out.
“Following WW2, IHT was raised to 80 percent to help tackle public debt.”
The potential for a rise to Inheritance Tax is something which leading tax and advisory firm, Blick Rothenberg, reiterated, suggesting it is likely Inheritance Tax could be the first tax to be raised in the aftermath.
Robert Pullen, a partner at the firm, said: “The government was already turning its attention to Inheritance Tax, even before the pandemic, and it is likely this is one of the taxes that the Chancellor will use to get money back into the Exchequer.
“Inheritance Tax brings in around £5.5billion per year, and thanks to the fiscal drag of freezing the nil rate band at £325,000, this has resulted in an increase to the number of estates paying Inheritance Tax.”
However, Mr Pullen went on to suggest that he didn’t think an increase that high would be likely – although some form of change may be.
How does Inheritance Tax work?
Inheritance Tax is a levy on estates (meaning the property, money, and possessions) of a person who has died.
Currently, the standard Inheritance Tax rate is 40 percent, but this is only applied at any value above a certain threshold.
Usually, this threshold is £325,000, however there may be ways to increase it.
Normally, there’s no Inheritance Tax to pay if everything above this threshold is left to a spouse, civil partner, a charity, or a community amateur sports club.
Those who give their home to their children or grandchildren can increase their threshold to £500,000.
Meanwhile, people who are married or in a civil partnership and whose estate is worth less than the threshold, can have any unused threshold added to their partner’s when they die.
It means that the surviving partner’s threshold can reach up to £1million.
Published at Sat, 27 Jun 2020 08:33:00 +0000