The Daily Telegraph - Saturday - Money
Bereaved families betrayed as inheritance tax stays put
Death duties are on track to double over 10 years after the Chancellor shelved plans to scrap inheritance tax.
Jeremy Hunt left the 40pc levy untouched in the Autumn Statement despite months of speculation – instead using his fiscal headroom to cut National Insurance.
His decision means the inheritance tax take will now soar to £ 9.8bn in 2028-29, according to the latest forecasts – up 82pc since 2018-19, when families paid £5.36bn.
Telegraph Money has been calling on ministers to abolish inheritance tax, and more than Tory MPs have backed our campaign.
Rachel Reeves, the shadow chancellor taunted Mr Hunt in the Commons for his apparent change of heart. Just days before the Autumn Statement, Mr Hunt was understood to be on the verge of cutting the 40pc rate, a measure that would have significantly lowered families’ tax bills.
The average charge paid by families is £214,000, according to the statistics from HM Revenue and Customs.
Ms Reeves said: “The Chancellor and Prime Minister have spent the last two weeks marching their MPs up a hill on inheritance tax, only today to march them down again.”
Andy Butcher, of wealth manager
Raymond James, said: “Families will be disappointed that no act ion was taken, especially given all of the rumours.”
Nimesh Shah, of accountancy firm Blick Rothenberg, said Mr Hunt’s decision to play it safe on personal tax cuts showed the Government was “nervous about any adverse public reaction” in the lead up to the general election.
The freeze on inheritance tax thresholds leaves bereaved families at the mercy of fiscal drag.
Sarah Coles, of stockbroker Hargreaves Lansdown, said: “Unless there’s movement on the thresholds, the days when this was just a tax for very wealthy people to worry about are numbered.”
Inheritance tax is charged at 40pc on the part of someone’s estate worth more than the nil- rate band of £ 325,000. Homeowners qualify for an additional £175,000 residence nil-rate band if they pass their home on to a child, bringing the allowance up to £1m for married couples.
The nil- rate band has been unchanged since 2009. Like the residence nil-rate band, it will remain frozen until at least April 2028, dragging thousands more families into the tax in the coming years.
The Government has one final chance to cut taxes before a general election is called.
Stephen Lowe, of retirement specialist Just Group, said: “All eyes now turn to the spring Budget – likely to be this Government’s final opportunity to curry favour with the electorate – to see if the Chancellor will wield his tax scissors on inheritance tax.”
According to the Office for Budget Responsibility, the Autumn Statement has left the Chancellor with £13bn of fiscal headroom – half the typical amount but twice as much as in March’s forecast.
Mr Hunt could choose to deploy this headroom in the spring by reducing the inheritance tax rate or, alternatively, he may choose to make inheritance tax reform a pledge in the Tory manifesto.
There was, however, one victory for bereaved families in the Autumn Statement. Although no action was taken on inheritance tax, the Government has backed down on previous plans to create a new pensions death tax.
Following the abolition of the lifetime allowance – a tax charge on pensions worth more than £1.073m – the Government said earlier this year that it was considering applying income tax to these pensions if the saver died before age 75.
The Government confirmed on Wednesday that if you die before 75, then your beneficiaries will be able to inherit your pension and take it as income tax-free, as is currently the case.
Rachel Vahey, of stockbroker AJ Bell, said: “Creating a new stealth tax would have been a massive shift in policy hitting hard the beneficiaries of pension savers who die early.”