Inheritance tax warning: Coronavirus could trigger huge tax spike to recoup borrowing
The coronavirus crisis has the UK economy staring down a black hole with economists warning borrowing could soar past £100 billion. Britain is facing an economic downturn not seen since the end of World War Two which saw property taxed at unprecedented levels. By 1949 Inheritance Tax also known as the “death tax” was raised to 80 percent.
Inheritance tax is levied on estates once a person has died and their assets are being passed on.
Inheritance Tax is currently paid on estates valued above £325,000, also known as the nil rate band.
The Treasury will receive 40 percent slice on the part of the estate above the threshold, but there are fears that figure could see a spike in the aftermath of the coronavirus crisis.
Tax Research UK – a British based economic think-tank, has called on Chancellor Rishi Sunak to target high earners and wealth owners to carry the burden of the financial crisis in the aftermath of coronavirus.
Tax Research UK, Director Richard Murphy said: “This would be those in the top deciles of income earners and wealth owners in the UK.
“Tax increases impacting the income of those in other deciles would be very hard to justify if measures to increase tax on wealth and income derived from it did not also happen.”
In the 2018-19 financial year Britons paid a record £5.4bn to HMRC in Inheritance Tax.
Despite pressure from the All Party Parliamentary Group (APPG) the Chancellor resisted calls to overhaul the system in the Spring Budget.
John Stevenson, the Conservative chair of the APPG said: “The huge complexity around how the tax is levied, and the reliefs available on it, leads to lots of confusion and a strong sense of injustice.
“The rich get away with not paying, and IHT is perceived as an unfair penalty on hard working savers.
“Our bold proposals for reform seek to address this unfairness by simplifying the system and ensuring that the higher value estates that currently take advantage of so many reliefs and exemptions actually pay some IHT.”
Institute for Fiscal Studies (IFS) has found Government borrowing by the end of the coronavirus health crisis will soar to at least £120bn.
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Philip Booth a Senior Academic Fellow at the Institute of Economic Affairs has said around £60bn of that figure comes from reduced tax revenues as employees and businesses are placed on lockdown.
In the Spring Budget Mr Sunak initially pledged just £12bn to fight the virus.
The Chancellor has since pledged a further £12bn to fund the job retention scheme for furloughed employees – which will cover 80 percent of salaries up to 2,500 per month.
In addition, a £9bn package has been announced for the self-employed, £20bn on business rate relief and grants, and a £7bn package to improve social security.
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