Published on: 1st June 2020
A massive increase in public spending during the Covid-19 crisis means the government will certainly need to increase taxes in the short to medium term. Already the government has announced that they will borrow an extra £180 billion in the second quarter of 2020, which will probably increase the government’s financing requirement compared to that set out in the Budget in March. The big question is; who should pay? And the answer probably will be those on the highest income and those with wealth.
During 2019-20 Inheritance Tax (IHT) receipts were slightly down with HMRC receiving £5.1 billion during 2019/20 but the proportion of UK deaths resulting in an IHT charge is still relatively low.
Possible capital tax reforms may be required to raise revenue, with the government having already received recommendations after consulting on IHT tax last year. One recommendation was reforming lifetime gifting. Currently, there are multiple lifetime gifting exemptions each dealt with differently. It was suggested that the various gifting exemptions should be replaced by a single personal gift allowance meaning significant changes to planning involving lifetime gifting. The tax-free capital gains tax uplift on death, where the value of an asset is rebased, and business and agricultural relief were also areas highlighted for possible reform.
With the government needing to finance their commitments and an emergency budget likely later in the year, if you would like to discuss inheritance tax and planning please do not hesitate to contact me.