The UK government recently reported a historic collection of £2.2 billion in inheritance tax, commonly referred to as the ‘death tax’.
In anticipation of the Autumn Budget, discussions are underway regarding potential reforms to this tax system. This increase highlights both the rising value of estates and the fiscal challenges faced by the Treasury.
The UK’s inheritance tax is levied at a rate of 40% on estates exceeding the threshold of £325,000. This system has been in place for years, aiming to tax wealth transfers upon death. Recent figures from the Office for National Statistics reveal a significant increase in revenue, with £736 million raised in the last month alone.
Additionally, considerations include removing existing reliefs on shares listed on the Alternative Investment Market (AIM) and exemptions for businesses and agricultural land, which are currently under scrutiny.
Sarah Coles of Hargreaves Lansdown warns that rising asset values and frozen tax thresholds will lead to higher tax bills even without reform, given existing financial pressures on the government.
Besides inheritance tax, additional revenue is being generated from other asset-based taxes, such as stamp duty on property, which saw an uptick to £1.2 billion in September.
These reforms are essential to address the rising costs of public services. However, they are likely to encounter resistance from various sectors if they substantially increase the tax burdens on businesses and families.
While substantial funds could be raised, any significant increase in taxation is expected to be met with opposition from impacted parties.
The potential reforms to the inheritance tax system underscore the government’s commitment to addressing fiscal deficits. As the Autumn Budget nears, the balancing act between raising revenue and containing public dissent remains crucial.
The proposed changes to inheritance tax highlight the delicate balance between fiscal responsibility and public opinion.
As the UK navigates its economic challenges, the implementation of these potential reforms will be closely monitored by both analysts and stakeholders.
