Chancellor Sajid Javid has suggested that the government ‘may be prepared’ to scrap inheritance tax (IHT).
IHT is levied on a person’s estate when they die, and certain gifts made during an individual’s lifetime. The rate of tax on death is 40% and 20% on lifetime transfers, where chargeable. For 2019/20, the first £325,000 chargeable to IHT is at 0%, and this is known as the nil-rate band.
A reduced rate of IHT applies where 10% or more of a deceased individual’s net estate (after deducting IHT exemptions, reliefs and the nil-rate band) is left to charity. In those cases, the 40% rate is reduced to 36%.
Speaking at the Conservative Party Conference, the Chancellor revealed that scrapping IHT is ‘on his mind’. Mr Javid said: ‘I understand the arguments against that tax. You pay taxes already through work or through investments, and your capital gains in other taxes. There is a real issue with then asking them to, on that income, pay taxes all over again. Sensible changes have already been made but it’s something that’s on my mind.’
However, experts have warned that abolishing IHT could be ‘hugely expensive’ as the tax raised £5.3 billion for the Treasury in 2018.
For sound advice on IHT planning to suit your circumstances, contact us.