Potential Changes to Inheritance Tax in the Next Autumn Statement

The Political Context

The potential changes to inheritance tax come in a broader political context. The government faces pressure to fund public services, reduce the deficit, and respond to an electorate that increasingly sees IHT as unfair or punitive, particularly given the rise in house prices over recent decades. A recent survey found that over 70% of people in the UK support raising the threshold at which inheritance tax is paid, reflecting a growing discontent with the current system.

Possible Implications of Changes

Any changes to inheritance tax will have significant implications. Raising the threshold or introducing a flat rate could ease the burden on middle-income families and reduce the number of estates caught by IHT. However, these measures could also reduce the revenue collected by the government, necessitating other forms of taxation or spending cuts to make up the shortfall.

Conversely, tightening reliefs or altering the rules around lifetime gifts could increase government revenues but may also lead to criticism that the tax is becoming more complex or unfair. Abolishing IHT altogether would be a radical move, likely requiring substantial compensatory tax reforms to offset lost revenue.

Conclusion

As we await the next autumn statement, it’s clear that potential changes to inheritance tax could have far-reaching consequences. Whether the government opts for modest reforms or a more radical overhaul, any changes will need to balance the need for revenue with the desire to create a fairer tax system.

The details will likely remain uncertain until the statement is made. However, understanding these potential changes can help individuals and families better plan for their future and navigate the complexities of inheritance tax.

* Estate Planning and Inheritance Tax are not regulated by the Financial Conduct Authority