HMRC The Latest
Anyone serious about inheritance tax planning should be conversant with the latest information compiled and issued by HMRC on 31 July 2024. You can find it here:
In the 2021/22 tax year, 4.39 per cent of deaths in the UK exposed the deceased’s estate to inheritance tax. That equates to around one in twenty of all deaths. While that doesn’t sound so significant, it means that 27,800 estates were exposed to inheritance tax in that year. UK taxpayers ended up paying a record £6billion of inheritance tax during the 2021/22 financial year. This is the highest proportion since 2016/17.
Where Is It All Going?
Inheritance tax could just be considered THE soft target for significant reform in the October 2024 Budget.
If the Chancellor were to increase the inheritance tax take, there are several different routes she could take.
The government may opt to remove the agricultural relief for those who do not actually own and work farmland themselves and remove the business relief where it doesn’t meet the original intention of the relief, i.e. to support revenue generating family businesses where the founder(s) die but the business continues within the family.
The government might also consider revisiting rules that mean inherited pensions can, with planning, be left to succeeding generations free of inheritance tax.
The popular press often speculates on a government aligning capital gains tax liabilities with the income tax regime. However, it could more stealthily choose to reconsider the way capital gains tax base cost effectively resets to zero on death. The so-called tax-free uplift. There is no obvious reason why this should be so and those that inherit chargeable assets could do so at original base cost rather than probate value. It is only a matter of removing a few words from the legislation and the deed would be done with little immediate fuss.
If there is a financial black hole that requires increases in taxation, then the capital taxes offer an excellent hunting ground …. if not in October 2024, then in subsequent budgets.
As far as planning is concerned it is worth remembering the dictum of Andy Grove, “Complacency breeds failure. Only the paranoid survive.”
Stephen Parnham
August 2024
