Inheritance tax could increase as Rishi Sunak told ‘hike to 80% could pay for pandemic’
Rishi Sunak says 'all support will be reviewed in budget'
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Chancellor Rishi Sunak is said to be considering reforms to a wide range of taxes which could impact people across Britain. Inheritance tax and capital gains tax are among those that could see drastic changes as the Government looks to raise funds to pay for the pandemic spending. Mr Sunak will announce his budget in March as the UK narrowly avoids a double dip recession. UK borrowing is expected to hit £400billion for the 2020-21 financial year, marking the country’s highest budget deficit outside wartime.
Finn Houlihan, the Managing Director at ATC Tax, believes that inheritance tax could be targeted, suggesting the rate could be raised from 40 percent to 80 percent.
He said last month: “The Prime Minister has ruled out a return to austerity measures, but reforms could include a one-off wealth tax, a new tax on goods sold online or the creation of a ‘capital values tax’ to replace business rates.
“Another tax which could have exemptions actually increased is inheritance tax.
“After World War 2, the existing allowance for inheritance tax was increased to 80 percent to accommodate for the implications of the thousands who lost their lives during the conflict.
“A similar reform may be introduced to help those who have lost loved ones due to COVID-19.”
This echoed claims made by Mike Warburton, formerly of accountants Grant Thornton and now The Telegraph’s tax columnist, who highlighted last year that the inheritance tax rate jumped to 80 percent after World War 2 and even 85 percent in 1969.
He said however that the Government is unlikely to increase rates to the levels seen in the aftermath of the war, but said some sort of increase was inevitable.
Funds recovered from the 40 percent levy on inheritance tax dropped by £200million (£5.4billion-£5.2billion) in 2019-2020 from the previous year.
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, to pay for the pandemic.
However, other economists have offered other solutions.
The Institute for Fiscal Studies (IFS) suggested earlier this month that pensions tax, council tax, inheritance tax and capital gains tax should all be reformed before levies are imposed.
Paul Johnson, director of the IFS, said: “We have a series of taxes on wealth or things close to wealth – tax on pensions, council tax, inheritance tax, capital gains tax. The first priority should be to sort these out.
“They are all badly designed and could be made more efficient and more equitable and raise more money, though not vast amounts more.”
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Richard Murphy of Tax Research UK warned against tax increases in an interview with Express.co.uk last year.
He said: “At first, Rishi Sunak completely underestimated what was going to happen, it was a complete disaster, because he hadn’t realised how disastrous coronavirus was going to be.
“But he was back a week later with the furlough scheme, it was smart, quick, some people lost out when they shouldn’t have done.
“Now Sunak’s obsession with debt is kicking in again.
“If he opts for austerity and tax hikes, then frankly we are heading for depression rather than a recession.”
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