Inheritance tax: Wealth tax could change as Sunak “is not afraid to raise taxes” | Personal finance | Finances
The recent increase in National Insurance has sparked a huge debate in the UK over how the government should pay for its spending on the pandemic. Many were angry about the tax hike as younger workers will be harder hit, while some wealthy people will be spared a tax hike. This has led to calls for changes in property taxes to ensure the bill falls on those with the broadest shoulders. Experts and politicians have long criticized the complexity of the UK tax system, with some suggesting that wealth taxes could be simplified.
One expert believes Chancellor Sunak will not be afraid to raise taxes on the rich.
Julia Rosenbloom, tax partner at Smith & Williamson, told FT Adviser last month, “Inheritance tax revenues are proving to be an increasingly lucrative source of income for the Treasury Department, providing funds for the government to rebuild the country after the pandemic and pay for its proposed reform program.
“The Prime Minister’s recent announcement that he is introducing a new health and social tax shows that he is not afraid of tax increases, even if they are unpopular with some members of his own party.
“This leads to speculation that when the Chancellor presents his budget next month, personal taxes like inheritance tax and capital gains tax could be reformed given the amount they levy on behalf of the Treasury.”
Shaun Moore, tax and financial planning expert at Quilter, agreed with Ms. Rosenbloom, noting that inheritance tax receipts rose 35 percent year-over-year between April and August.
He said: “This is a real boost for the Chancellor, but compared to other forms of tax it is really a small beer.
“So the Chancellor may look elsewhere to get some serious money into his budget in the fall.”
“The Chancellor needs additional funding to pay for the pandemic’s economic support programs.”
HMRC data released last month showed that estate tax receipts rose by £ 700 million over the reporting period to reach £ 2.7 billion as both the zero rate and residence rate remained frozen at existing levels.
Paul Archer, Kingswood’s wealth planner, explained why inheritance tax revenues are increasing.
He said, “The main reasons for the increase in inheritance tax receipts are threefold.
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“First, the £ 325,000 zero rate – the amount of wealth a person has before receiving 40 percent inheritance tax – has not increased since 2009.
“Second, property values have risen over the past year mainly due to strong investment returns and property appreciation.
Thirdly, the bulk of wealth in the UK belongs to the over 60s, the age group where Covid has unfortunately resulted in more deaths than usual.
“In fact, for these reasons, we expect revenue to grow steadily this year and through to 2022.”
It seems that the next big tax change could come in the form of an increase in the council tax, as ministers are reportedly considering an increase to fill the welfare funding gap.
When asked if the government could raise taxes again so soon after the introduction of national insurance to fund the NHS and welfare, Mr. Sunak said the increase in the tax burden was “not something we did lightly,” Times Radio said : “It’s not something we want to do, and ideally we wouldn’t have to do it all over again.”
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Urged on the question of whether the council tax could be increased to fund social welfare, he said it was wrong to “anticipate” the deal on local government funding later this year.
He told Sky News, “What people should know is that we want to put more money into welfare, so we made the decision that we made.”
The councils were promised £ 5.4 billion thanks to the health and welfare charge announced last month.
However, half of that funding will be used to cap the lifelong amount people have to pay for care to £ 86,000.
The councils fear that the other half will be lost in nursing home fees to cut costs for the middle class who are currently subsidizing those who don’t pay themselves.
At present, the municipalities can only increase the council tax by two percent, plus a further three percent for social care.
If they want bigger hikes, they have to call a local referendum, which happened only once and has resulted in a bad defeat for the idea of a tax hike.