Chancellor of the Exchequer hints at abolishing inheritance tax in the future
At the Conservative conference this week, Sajid Javid has hinted that the government may consider scrapping inheritance tax.
At the Conservative conference this week Sajid Javid was asked if he would scrap inheritance tax. Mr Javid said that there was “a real issue” around inheritance tax. He added, “I do think that when people have paid taxes already, through work or through investments and capital gains and other taxes, there is a real issue with then asking them, on that income, to pay taxes all over again.”
Inheritance tax is paid on a person’s estate when they die. This is based on the property, money and possessions they held immediately before they died, as well as any gifts they have made in the last seven years of life.
Whilst the Government has given no firm indication, at this point, as to whether it plans to increase the non-taxed threshold, reduce the overall rate or even scrap the tax altogether, reform of the inheritance tax regime would be a welcome change for many. In a 2016 YouGov poll about all forms of tax, 59% of those polled rated inheritance tax as ‘unfair’.
Whilst almost 25,000 estates are liable for the tax each year, 250,000 estates need to complete and submit forms to check whether they are liable for the tax. According to HMRC reports, inheritance tax receipts received during 2018-19 amounted to £5.4 billion - an increase of 3% (£166 million) on 2017-18. Inheritance tax receipts have increased year on year since 2009-10.
Subject to exemptions - such as assets being gifted to a surviving spouse, civil partner, or registered charity – the general rule currently is that estates are liable to inheritance tax at 40% of anything above £325,000. If gifts have been made within the seven-year period leading up to death, the £325,000 threshold may be reduced.
In April 2017, an additional inheritance tax nil rate band was introduced – the residence nil rate band. This allows for a reduction on the inheritance tax payable on a deceased person’s residence if the property is gifted directly to children/grandchildren, as opposed to being held in trust.
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If you would like to obtain estate planning advice generally or specifically in relation to inheritance tax, our team of specialist advisors will be able to assist. You can contact us by calling 0345 0739900 and asking to speak to a member of the Wills, Trusts and Estates team.