With just two weeks left until the autumn budget, some will have to pay. There is a huge hole in the government’s bank balance and fill Shi Sunak has to find a way to fill it. A national insurance increase has already been announced, and it looks like the inheritance tax hike could be the next.
Here’s why I think inheritance taxes could increase in the autumn budget.
Why should the Chancellor raise taxes in the autumn budget?
The government’s Covid-1 measures have been very costly. According to the BBC, “In the first year of the epidemic, from April 2020 to 2021, [the government] Row 299 billion, the highest number since the record began in 1946.
This expenditure has continued to snowfall in the second half of 2021. The government will have to pay for increased furlough payments, increased universal credit, mass examinations and expensive national vaccination activities.
Ishi Shi Sunak has stopped raising taxes for 18 months, so the government has taken extra cash orrow for extra money. At the end of March 2021, government debt stood at ২ 222.5 billion, according to the National Statistics Office. This is the highest debt since the 1960s.
Why can Rishi Sunak raise inheritance tax?
Ishi Shi Sunak has already increased national insurance by 1.25%. But he needs to raise more funds to bridge the gap between government spending and revenue. The government is unlikely to raise income taxes, which leaves a few other options.
Here I think the reasons why Shi Sunak can choose to raise inheritance tax in the autumn budget:
- Generous allowance cut. Currently, inheritance tax rules allow some people to be tax-free up to £ 1 million. This is due to the rules of the generous and complex accommodation zero rate band. If ishi shi sunak decides to remove or reduce some allowances, then much richer people will have to pay inheritance tax.
- To share the burden over the ages. The Chancellor has already increased national insurance by 1.25%. It is a tax that mainly affects people of working age and is not usually paid by pensioners. Increasing inheritance taxes means that the families of older, richer people have to pay more of their taxes.
- Benefiting from high property prices. Wealthy baby boomers have benefited from a massive rise in property prices and many have significant wealth assets. But there is no tax bill on the assets of these extended assets in their lifetime. Increasing inheritance tax or abolishing residence zero rate band means additional tax revenue will be collected from these increased assets.
- To take forward the government’s ‘leveling’ policy. The government is currently trying to appeal to working class voters in the north of England. They may want to pay more taxes to wealthy individuals across the tax burden across different social classes.
- To simplify complex rules. Inheritance tax rules can be made extremely complex and simple. The government may cancel some relief and find ways to raise taxes further.
How much can your bill increase after the autumn budget?
If you are married and own property worth k 600k, you will not be able to pay any inheritance tax at present, depending on your circumstances. If the government abolishes the residence nil rate band and lowers the standard nil rate band to £ 500k (k 250k per person for a married couple), you will pay inheritance tax on এস 100k of your estate. This means that beneficiaries may have to pay an additional £ 40k in taxes if they wish.
If you have assets worth million 1 million or more, you will not be able to pay any inheritance tax at present, depending on your circumstances. If the government abolishes the residence nil rate band and reduces the standard nil rate band to £ 500k (k 250k for each person in a married couple), you will have to pay inheritance tax on the top 500 k of your estate. This means that beneficiaries may have to pay an additional £ 200k in taxes if they wish.
Please note that tax management depends on your personal circumstances and may change in the future. The content of this article is for informational purposes only. It is not the purpose of any kind of tax advice, nor does it constitute it. Readers are responsible for doing their own due diligence and seeking professional advice before making any investment decisions.
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