The Institute for Fiscal Studies (IFS) has projected that Inheritance Tax could generate £15 billion annually by 2032. Prime Minister Rishi Sunak is considering reducing this tax, but in the current economic climate concerns have been expressed as to whether there are “more pressing national priorities”.
Recent data from the HMRC figures showed fewer than four per cent of estates paid inheritance tax between 2020 and 2021. The number is expected to rise to more than seven per cent across the next 10 years.
The cost of abolishing the Inheritance Tax would be £7 billion, but this would rise to £15 billion per year by 2032. The 90 per cent or so of estates not paying Inheritance Tax would not be directly affected by such a reform according to the IFS report.
Downing Street is trying to play down reports that the Government plans to slash the tax, but discussions are said to be taking place within the Government. The UK is unlikely to see immediate Inheritance Tax cuts in the next Autumn Statement, but they could be included in the manifesto ahead of the next general election – expected to take place next May.
In the event of a change of government at the election, then any reduction in Inheritance Tax is unlikely in our view; indeed, the scope of the tax may well be widened, particularly if an incoming Labour administration abolishes non-domiciled status, which may have the result that overseas assets of non-domiciled residents are brought within the scope of IHT.
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