Inheritance tax could be targeted by Sunak as families warned ‘you may need to sell homes’
Prime Minister Boris Johnson has laid out his plans for a National Insurance rise, bringing the levy to 13.25 percent from 12 percent. Announcing the plans in the Commons, Prime Minister Boris Johnson said the costs of the programme will be split between individuals and businesses and “those who earn more will pay more”. The levy is expected to raise about £12billion which, in the early years, will mainly be used to fund dealing with the NHS backlog. The Prime Minister accepted in the Commons today that he had broken a 2019 manifesto commitment.
Many fear that the plans will disproportionately impact younger people, leading to calls from some to increase wealth taxes instead.
The Government collected £2billion in inheritance tax receipts for April to July 2021, an increase of £500million when compared to the same period a year earlier.
Julia Rosenbloom, tax partner at Smith & Williamson, warned last month that the Treasury is becoming increasingly dependent on wealth taxes.
She said: “One of the key drivers for the uplift will no doubt be the announcement in this year’s Spring Budget that both the nil rate and residence nil rate bands are to be frozen until at least April 2026, resulting in increased inheritance tax bills for families as more estates are brought into scope on the back of soaring property and share prices.
“As the Government continues to spend to help re-build the country following the pandemic, as well as the need to fund other areas such as social care, it will no doubt be casting its net far and wide to boost its coffers.
“We still don’t know when the Chancellor will announce his next Budget, but whenever it takes place it is quite possible that personal taxes, including inheritance tax and capital gains tax, could be in for a massive overhaul given the amount they raise for the Treasury on an annual basis.
“Increases to inheritance tax charges could affect many and some may need to go as far as selling family homes to pay their inheritance tax bills. Starting tax planning as soon as possible will mean that people can make the most of their current allowances before any new reforms are introduced.”
Inheritance tax has gone without a major overhaul so far, but Mr Sunak did announce in March’s Budget that the £325,000 threshold at which the levy is paid will be frozen until 2026.
He defended his decision, saying it would “strengthen the public finances” amid the pandemic.
READ MORE:Rishi Sunak warned many avoiding capital gains tax and inheritance tax
In an interview with Express.co.uk last month, an expert claimed wealth taxes are the fairest way to raise funds to pay for social care.
Analyst at AJ Bell, Tom Selby, said: “I think wealth taxes are probably the fairest way – ensuring those with the broadest shoulders are targeted to take on the costs of paying for COVID-19.
“It would be fair, whether it is something they believe they can do politically is another thing. There will be challenges around people avoiding bills.”
On whether the rate of inheritance tax could increase, Mr Selby predicted the Government will instead look to change.
He added: “You can either increase the percentage charged or you can decrease the limits of inheritance tax. Historically they have gone for the thresholds route and I suspect that is the option they would go for again.”
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Various Labour Party figures have hinted that wealth taxes would be the party’s preferred route, including Shadow Foreign Secretary Lisa Nandy.
Ms Nandy said she’s be open to an increase in wealth levies such as inheritance tax and capital gains tax.
She said the “broad principle (that) those with the broader shoulders should take some of the burden” was “absolutely right”.
This came after the Trades Union Congress (TUC) called for an increase in capital gains tax to raise £17billion a year.
Mayor of Greater Manchester, Andy Burnham, has echoed this.
He said last week that taxing wealth is the “fairest way” of funding new social care reforms.
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