Be Very Wary of Inheritance Tax Cut Rumours

Rumours have been flying around news channels this week speculating on an ‘aspirational offer to voters’ before next year’s General Election, by Prime Minister Rishi Sunak via the Chancellor Jeremy Hunt that the government may look to cut or even abolish inheritance tax (IHT).

As many may know, IHT is the most hated tax by the people of the UK.  “They tax you when you are alive, and they tax you when you die” is a phrase we have heard many times.

We urge caution on this and to not be fooled.

Each person in the UK already has:

• £325,000 an inheritance tax nil rate band.
• £175,000 main home private residence nil rate band provided your interest in your main property is passed down your blood line to children and grandchildren.
• This means we all potentially have an inheritance tax free allowance of £500,000.
• If you are married on in a civil partnership and you leave everything to your partner of death, you have not used up your own nil rate band allowances and these are transferred to yoru surviving partner.
• This means on 2^nd death, your partner has inheritance tax allowances of up to £1m.

Most Estate Pay No IHT Already

Most people do not pay inheritance tax on death although given recent property price increases and frozen allowances until 2028, more and more are with Treasury inheritance tax receipts jumping to new records.

Why the Potential Change or Abolition of IHT?

By having an IHT liability, many people start estate planning earlier when prompted.  We already have the tools to reduce IHT to zero if required so we see this as a 'vote chaser'.  See 13 Ways to Save Inheritance Tax IHT Reduce

If you plan IHT issues successfully, it means your assets may also not be included in any care fees means test. 

See Cares Fees Protection Ideas:  Split Home Ownership and Move In With Relatives

Make no mistake, given the ageing population and the later life care fees crisis, the Government and your Local Authority would prefer you not to plan for IHT as this means more of your wealth can be assessed in any care fees means test.  By potentially abolishing or reducing IHT, they are:

• Trying to make ordinary people less focussed on estate planning so that they can means test assets not already given away.
• Any abolition or reduction to IHT will not affect most taxpayers anyway.
• Appeasing wealthier people with an IHT reduction or abolition as the wealthier can usually already afford care fees anyway or have enough assets to do so, so it is perhaps just a vote 'grabber'.
• Abolishing IHT will no doubt also help super wealthy politicians 'AKA' the Prime Minister and his colleagues in The House of Lords and The House of Commons with their estates as well as their wealthy partners' UK estates.
• Is there a 'Wealth Tax' on the way?

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