Investment - Articles - Inheritance tax receipts continue upward spiral

Just Group and Wealth club comment as inheritance tax continues their upward spiral

 Stephen Lowe, group communications director at retirement specialist Just Group, commented: “Last year set a record for inheritance tax receipts with £7.5 billion collected in total and this year is off to a racing start with over £1.4 billion collected over the first two months.

 “The OBR’s forecast paints IHT as an increasingly lucrative source of income for the government with its latest revision expecting receipts to rise to an estimated £9.7 billion by 2028/29, driven by a combination of frozen thresholds and house price growth tipping more estates over the threshold.
 “The General Election is less than two weeks away and, despite IHT being a hot topic of debate leading up to the election campaign, there is a distinct lack of policy commitments in some of the key manifestos. The Conservatives shied away from a rumoured pledge to cut IHT but Reform has pledged to abolish inheritance tax for estates worth less than £2 million.
 “Meanwhile, Labour and the Liberal Democrats have remained silent on IHT in their respective manifestos. Particular attention will be paid to Labour’s policy position given the odds on them winning an outright majority and the commitment only to avoid tax rises on working people may hint that inheritance tax could still be on their list of revenue raising options if needed.
 “On balance, it seems unlikely there will be any change in the very near future but it remains one to watch. For people who think they may be affected by IHT we recommend they regularly review the entire value of their estate, including obtaining an up-to-date valuation of their property. Speaking with a professional, regulated adviser will then help in understanding how to legitimately manage exposure to the tax.”

 Nicholas Hyett, Investment Manager at Wealth Club said: “Inheritance tax is a hot topic this election. Labour are targeting non-doms who shelter their money abroad and the Conservatives have accused Labour of harbouring secret plans to go further – with inheritance tax notably absent from the list of taxes in the Labour manifesto that will not be increased. Meanwhile Reform have promised generous inheritance tax cuts as it looks to win over voters.

 The reality is that inheritance tax would likely rise under either of the two main parties. Freezes on thresholds over the last few years, partnered with decades of house price rises have brought more and more estates into the tax band. Attempts to increase taxes on wealthy non-doms may be politically popular, but most of the tab will still be picked up by families who would not consider themselves particularly rich. For these families, their standard of living hasn’t changed, indeed inflation means it might have gone backwards, but frozen allowances mean the government now considers them wealthy enough to face inheritance tax.

 As things stand there are some useful ways to mitigate inheritance tax – whether that’s making gifts in your lifetime, passing pensions on tax free, investing in certain qualifying AIM shares or making EIS/SEIS qualifying investments. However, political uncertainty is right now – and with inheritance tax a bit of a political football it’s difficult for investors to make informed decisions.

 As ever, uncertainty is the enemy of investment ultimately undermining economic growth.”

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