Autumn Budget: Chancellor Rachel Reeves preparing inheritance tax raid
Rachel Reeves is reportedly preparing an inheritance tax raid, as the Chancellor seeks to hike taxes and cut spending by as much as £40bn in October’s Budget.
Although the BBC reported initially that the government has not settled on the details, the various reliefs on inheritance tax are likely to be in the firing line.
Currently there is a 40 per cent flat rate on inheritance tax which applies on any estate worth more than £325,000.
However, there are a range of tax reliefs which means the effective rate can often much lower. Two of the most prominent inheritance tax reliefs allow for family businesses and agricultural land to be passed on tax free.
Research from the Centre for Analysis of Taxation, published yesterday, suggests that these reliefs help create big discrepancies in the effective tax rates paid by different estates.
According to their research, one in six estates worth over £10m pay an effective tax rate of less than four per cent while a quarter pay close to the 40 per cent headline rate.
The BBC also reported that rules around gifts made during someone’s life could be subject to change. The report suggests that if someone gave away more than £325,000 in gifts, but dies within seven years, then recipients could pay inheritance tax.
Its unclear how much these measures would raise or how many more people would end up paying the tax, the BBC reported.
Just four per cent of estates pay inheritance tax at the moment, although this is likely to increase on the back of increasing asset prices.
The news comes as reports suggest that the Chancellor could be looking to make £40bn worth of tax rises and spending cuts in the Budget.
A spokesman for the Treasury: “We do not comment on speculation around tax changes outside of fiscal events.”