With most headlines about Wednesday’s austerity-busting budget talking up the ‘extraordinary’ measures Chancellor Rishi Sunak is taking to tackle the coronavirus-led threat to both public health and our economy, you might be forgiven for overlooking some of the other key points. In fact, now we think about it, what exactly did the treasury have to say about Inheritance Tax (IHT)? Very little, as it turns out. Could the chancellor’s silence on the matter signal that a review of this controversial tax might be off the cards? And for how long?
For several months, many experts had confidently predicted a big shakeup of the so called ‘death tax,’ and they had good reason. After all, only last year the previous chancellor commissioned a review of IHT by the Office for Tax Simplification, who then recommended several key changes. This was followed by a cross-party group of MPs calling for a radical reform to they system, which included a reduction in the current 40% rate to 10%, amongst other measures. There were even whispers about abolishing the seven-year rule entirely.
However, with no word on any changes in the budget, it seems these plans may have been put on ice… for now.
Why is the 40% IHT rate unchanged?
Back in October at the Conservative party conference, former Chancellor Sajid David said scrapping IHT was ‘on his mind.’ But as Harold Wilson once said, a week is a long time in Politics. And a lot has changed in the last five months, including the chancellor. On one hand, it is possible the idea of reforming or scrapping IHT entirely didn’t appeal to his replacement in the same way it did to Sajid David. But on the other hand, it may simply be a case of having to make hard choices based on the current climate.
In 2018-19 alone, for instance, HMRC gathered around £5.4billion in IHT. For a government who have just announced a wide-ranging budget, with plans to invest heavily in mitigating the immediate threat of coronavirus, whilst also setting out their stall as an austerity ending investor in infrastructure and ‘levelling up’ the country, that kind of revenue will come in handy. Some very large cheques are going to be written in the coming months, and that money has to come from somewhere.
Where does that leave IHT?
To repeat the words of Harold Wilson, a week really is a long time in politics, and that has never been truer than right now. For instance, the economic effects of the coronavirus outbreak could be milder than some fear, and other unknowns, such as the final stages of Brexit, could well change the playing field even further, for better or worse.
One thing we do know, however, is that IHT remains controversial and unpopular with many, including senior government ministers. So whilst reforms may be off the agenda for now, they could well be waiting in the wings for the right time. And that could be sooner than you think.
Worried about the unknown? Attwells Solicitors offer the reassurance of a fixed-fee inheritance tax advice service to clients in London, Ipswich and Colchester. Email Laura Harrington-Rutterford for a FREE initial no obligation chat.