Tax rises are reportedly around the corner, ahead of Sunak’s Budget announcement in March
Chancellor Rishi Sunak is believed to be considering a wide range of tax reforms and rises amid the pandemic-induced recession. Tax rises are reportedly around the corner, ahead of his Budget announcement in March, which may likely affect the self-employed. But, according to experts, there are also a number of wealth taxes that could be hiked, who warned inheritance tax reforms could lead to bills on gifts. As Yahoo Finance claimed last month, the Potentially Exempt Transfer (PET) regime is set for review.
It currently allows individuals to make gifts of unlimited value to friends and family members without attracting inheritance tax liabilities if one lives for a further seven years.
Debbie Wilson, a director at tax advising firm Hillier Hopkins, said this could be changed.
She said: We can expect change in 2021, perhaps with an immediate inheritance tax charge on such gifts. It would be an easy change to make, facing limited opposition and could quickly be introduced.
Julia Rosenbloom, a partner and Smith and Williamson and tax adviser, made a similar claim in November.
She predicted, PETs will be abolished, and recommended that people make gifts sooner rather than later to avoid extra charges.
Ms Rosenbloom wrote for Your Money: This could be replaced with an immediate lifetime inheritance tax charge upon making the gift.
If the recommendations made by the APPG (the All-Party Parliamentary Group for Inheritance and Intergenerational Fairness) in their report released in January are taken on board, that could mean a rate of 10-20 percent where a gift exceeds £30,000, Ms Rosenbloom said.
So, if you’re thinking of making a substantial gift, it would be advisable to consider doing it sooner rather than later. Action taken in anticipation of changes does, however, involve significant risk as changes may not be introduced as expected, she said.
Funds recovered from the 40 percent levy on inheritance tax dropped from £5.4billion to £5.2billion (a difference of £200million) in 2019-2020 compared with the previous year.
In order to pay for the pandemic, the Wealth Tax Commission suggested a tax on people with assets of more than £500,000, or £1million for a couple, including their family home and pension.
A report by the Office of Tax Simplification, commissioned by Mr Sunak, suggested rises in capital gains tax which could impact inheritance duties.