Abolishing inheritance tax would be a good move for the Chancellor in tomorrow’s Spring Budget, as it would appeal to Tory voters and remove less than 1% of tax income.
That is according to probate brokers Final Duties, which claimed that such a move would save UK taxpayers £5 billion per year.
Jack Gill, managing director of Final Duties, said: “As the general election gets closer, the government will be keen to make a splash with a headline statement designed to win favour ahead of the next election. Having already shied away from a proposed 99% mortgage policy, it seems that abolishing inheritance tax might be the best trick they have up their sleeve.
“The reason such a policy might work is because it appears, on the surface, to be a generous tax break at a time when so many are struggling financially. It also appeals to the Tory stronghold with whom the idea of being taxed on the assets you have gained through a lifetime of hard work doesn’t sit well.
“However, it’s fair to say that abolishing inheritance tax isn’t actually that big of a carrot to dangle in front of soon-to-be voters, accounting as it does for such a small slice of the tax pie.
“It’s also fair to say that it would make very little difference for the majority of people because, as was recently reported, only 4% of estates in the UK are actually subjected to inheritance tax. So if an abolishment does make a difference, it will only be for the most wealthy corners of society.”
Almost every time the UK government has delivered a budget in recent years, analysts have speculated about the possibility of changes to inheritance tax (IHT).
With an election looming, the firm said there’s murmurings that we could finally see it overhauled or even scrapped in this week’s Budget.
In the financial year 2020-21, the UK’s total inheritance tax bill came to £5.1 billion, 99.1% higher than in 2010-11, at £2.6 billion
Rising house prices is a major contributor to this increase, as inheritance tax is only applied to estates valued at £325,000 or more, with this threshold increasing to £500,000 for direct descendants of the deceased, such as their children.
Rising property prices means more and more estates are being pushed above this threshold.
On a regional level, the biggest increase in inheritance tax payments has been recorded in the North East, where the bill has risen by 153.8% in the last decade. This is followed by the West Midlands (137.4%), East Midlands (126.3%), East of England (120.3%), and London (111.7%).
In 2023 inheritance tax receipts accounted for just 0.91% of all HMRC tax income, while The Times recently reported that just 4% of estates have such a high value that they are subject to inheritance tax, meaning that abolishing it would only impact the nation’s most wealthy people.
