The standard inheritance tax rate is 40 percent, and it is only charged on the part of your estate that’s above the threshold of £325,000. But the Chancellor of the Exchequer could be looking into ways to change this as he aims to raise more funds following the economic recession that came with the pandemic. At the moment, the vast majority of estates do not pay inheritance tax and over the next five years more than 94 percent of estates are forecast to have zero inheritance tax liability.
However, the Mail reported earlier this year that Mr Sunak and the Treasury will rake in £90billion over the next five years through various wealth taxes.
A Budget document from March outlined that Mr Sunak was using stealth taxes in order to increase the amount the Government received from duties.
The inheritance tax threshold was frozen until 2026, along with the pensions lifetime allowance and capital gains tax thresholds.
Sam Collins, policy adviser at the Institute of Economic Affairs think tank, said: “Instead of increasing the tax burden on businesses and individuals, the Chancellor should go for growth and take radical steps to simplify our tax code – leaving more money in the hands of individuals, families and businesses.”
Figures from the Office for Budget Responsibility (OBR) showed that the Treasury earned £14.9billion from capital gains and inheritance tax in 2019-20.
But by 2026 it will make £21billion – a rise of 41 per cent.
Mr Collins added: “Wealth taxes lead to economic distortion, harming businesses and individuals.
“The Chancellor argues that investment is key to our economic recovery, but capital gains tax has the reverse effect. At high levels, it discourages investment, deters entrepreneurship and encourages tax avoidance.
“Inheritance tax is known as Britain’s most hated tax for a reason. It is not only immoral as a form of double taxation but is a bureaucratic nightmare for families.”
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However, while some experts are critical of increased wealth duties, others believe that they could hold the key to rebalancing the economy.
Chief Economist at Resolution Foundation, Jack Leslie, told Express.co.uk earlier this year that the Government should reform wealth taxes in order to raise funds.
He said: “The Government should fix the system that it has, make it fairer, and close the loopholes.
“You could raise billions without touching the headline rates, fixing the current system is a better approach than trying to introduce a whole new wealth tax.
“One of the really big trends in the economy over the last 30 years is that the overall value of the wealth people hold is worth around twice what it was 30 years ago.
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“But at the same time, taxes on wealth have stayed completely flat, so we are essentially taxing wealth half as much as we used to.
“That doesn’t seem to make much sense given we might need to find more money after this crisis, and wealthy people can probably afford to pay more.
“It makes sense that the people who are less likely to have lost their jobs and face health risks, it does make sense that wealthy people should pay more in the future.”
On July 29, HMRC released inheritance tax statistics which showed receipts received by the Government during the 2020 to 2021 tax year totalled £5.4billion.
This was an increase of four percent, £190million, on the 2019 to 2020 tax year. HMRC explained that this reversed a fall seen last year and means receipts have remained at broadly similar levels since the 2017 tax year.