Brits fear inheritance tax hike to pay for Covid-19

Recent research has revealed that four in 10 people in the UK fear the UK Government will increase the current 40 per cent inheritance tax (IHT) rate to help cover the cost of the Covid-19 pandemic.

Tower Street Finance found that more than half of the correspondents to its survey (54 percent) think a 50 percent tax on inheritance is coming, according to an article in Today’s Wills and Probate, with three in 10 people fearing it might be 60 percent, and one in seven suggesting even a 70 percent tax.

The government received £2.4 billion in inheritance tax in 2009/10. In 2019/20, the figure was £5.2 billion – more than double.

House prices

Not everyone pays inheritance tax. The levy is only applied if the value of an estate is worth more than £325,000 though the number of individuals who are liable for this tax has increased in recent years thanks to the value of houses, particularly those in the south east of England.

Inheritance tax must be paid before an inheritance is paid out to beneficiaries.

Tower Street Finance’s research also found that four out of 10 people do not believe the government should make changes to inheritance tax or the nil band rate to pay for the Covid-19 pandemic.

One in five think inheritance tax should increase

However, one in four people do think the government should reduce the nil rate band so more estates have to pay inheritance tax and another 20 per cent think the IHT rate should increase.

According to the National Audit Office, the pandemic has cost £271 billion (total cost estimate for measures for which central governments departments are responsible), £116 billion (how much the government has spent on these measures so far) and £89 billion (the amount the government has loaned or guaranteed so far).

Tower Street Finance managing director Andrew Bartle said that it was only a matter of time before the chancellor was forced to announce tax rises. Their research showed, he added, that most people saw the inheritance tax rise as inevitable.

To raise money to pay for the pandemic, the government will need to cut spending or raise taxes, or more likely a combination of both. The three biggest taxes in the UK are income tax, national insurance and VAT – all of which the Conservative Party promised not to raise in its December 2019 manifesto.

The Institute for Fiscal Studies think-tank has warned that tax rises of more than £40 billion a year are “inevitable”.

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