Inheritance tax climbs again – fury as more bereaved families dragged into ‘horrid tax’
Inheritance tax: Financial advisor provides advice
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Tax experts warned this is only the start of inheritance tax (IHT) increases, and Britons should plan now or face handing more of their wealth to HM Revenue & Customs (HMRC). IHT receipts totalled £3.6billion between April and October this year, up from £3billion in the same period last year.
They are set to climb even higher following Chancellor Rishi Sunak’s move to freeze the inheritance tax threshold for five years, in his March Budget.
This will steadily drag more middle income families into the net as house prices and stock markets rise.
TaxPayers’ Alliance research director Duncan Simpson condemned the “death tax”.
“Coughing up for a huge IHT bill is a horrible thing for grieving relatives to handle, especially with more bereaved families being dragged into this unpopular and unfair tax.”
He said many want to see IHT ditched altogether.
“At the very least, thresholds should be raised to £1 million to protect more taxpayers from these horrid bills.”
Myron Jobson, personal finance campaigner at interactive investor, said the increased IHT take felt “unsavoury” in the context of the Covid pandemic.
He blasted Mr Sunak’s move to freeze the £325,000 IHT nil-rate threshold and the main residence nil-rate band for home at £175,000 until the 2025/26 tax year.
“IHT increasingly feels like a raid on hard working families, rather than the very wealthy it was originally targeted at.”
Mr Jobson said many people think inheritance tax is unfair because they are effectively being taxed twice on the same earnings.
Andrew Aldridge, partner at Deepbridge Capital, said the figures show how it is easy to generate a potentially large inheritance tax bill on death, “despite not being what you may perceive as wealthy”.
Ami Jack, head of national tax at Smith & Williamson, said the Treasury will welcome the increased IHT revenues to cover the extensive spending commitments Sunak announced last month.
He advised families to invest tax efficiently and make gifts to reduce their IHT exposure, and warned that IHT could even rise again.
Many had expected Mr Sunak to announce further tax increases in his Autumn Budget but this may be a temporary reprieve, warned Andrew Gillett, head of wealth management advice at BRI Wealth Management.
“More families will pay IHT in the coming years due to the freezing of allowances and there may be further reforms to come.”
Mr Gillett added: “The important thing is that families don’t sleep walk into paying this tax and take advice in good time to ensure planning is effective.”
Amid the rise, some campaigners pointed out not everyone will be affected by IHT, which is charged at 40 percent above the threshold.
Tax Justice UK Executive Director, Robert Palmer, acknowledged the amount raised in inheritance tax does look higher than previous years, but pointed out not everyone will be hit.
“However, most British families will never be liable for inheritance tax as a result of the reliefs and allowances that protect most estates, around four percent of estates end up paying inheritance tax.
“We need to reform our wealth tax system to ensure that the really wealthy pay their fair share.”
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