Last week both the Chancellor, Sajid Javid as well as the Communities Secretary, Robert Jenrick hinted at major changes to inheritance tax (IHT) – and potentially even its abolition – but is that really likely?
While IHT has always brought in much less revenue that some of the other taxes, its take does now seem to be on the increase. HMRC recently revealed that the UK has broken the collection record – £5.4bn in IHT was collected in 2018/19, an increase of £166m versus 2017/18.
But are those funds that the Government can afford to refuse? Even when you consider that this loss of tax would likely be counterbalanced with an increase in other taxes. For example, the capital gains tax (CGT) exemption available on death would likely be removed meaning CGT may arise on inherent gains on assets held on an individual’s death.
The Office of Tax Simplification reports published in November 2018 and July 2019 set out some proposals for reforming inheritance tax. The first report was around reducing the paperwork and heavy administration burden associated with IHT. However the second one focused on a change of certain reliefs and exemptions, not a wholesale abolition.
This had been seen as an indication of the way the wind was blowing, but with two Cabinet ministers making comments such as those above, could a different future for the tax be being planned?