The Prime Minister, Rishi Sunak, is drawing up plans to cut inheritance tax.
In a move to appease the Party faithful at next month’s Conservative Party Conference, sources suggest Sunak is considering cutting the ‘most hated tax in Britain’ and possibly phasing it out completely.
What is Inheritance Tax and who pays it?
Inheritance Tax (IHT) is charged on the estate of a deceased person if it is valued at more than £325,000. There is an extra £175,000 allowance towards a main residence if it is passed to children or grandchildren. A married couple can pass on up to £1 million to their children without paying tax. The rate of tax for anything over the allowance is 40% currently.
Proposed changes to Inheritance Tax
Sources suggest Sunak will reduce the percentage paid while he considers whether to abolish the tax altogether.
Figures from the Treasury show that only 3.76 per cent of UK deaths result in an inheritance tax charge. However, a YouGov poll for The Times suggests that people significantly overestimate their likelihood of having to pay. About a third (31 per cent) of people think that their assets will be enough to attract inheritance tax when they die, and 15 per cent expect to receive an inheritance large enough to attract the tax.
While many may hate the idea of paying tax on money earned from a taxed income, if Sunak abolishes IHT, it will cost the Treasury about £7 billion a year. This money will need to be found elsewhere. A cut to IHT will benefit those living in the South more than the North as property prices are much higher and it is property prices which drag most people into paying IHT.
Reducing your Inheritance Tax liability
Until any changes are confirmed, it is worth reviewing your assets and determining if your estate will attract IHT when you die. If you think you will fall into this category, pre-planning is the key to reducing your liability. A specialist Wills and Probate solicitor in Southport will be able to assist you with this.
To book an appointment, contact Debbie on 01704 532890.