Hunt move will make more people pay inheritance tax

JEREMY HUNT is to announce a tax raid on inheritance as he attempts to balance the books in next week’s Autumn Statement.

The Chancellor and Rishi Sunak, the Prime Minister, are understood to have agreed to freeze the threshold above which people must pay tax for another two years. It means that more people will have to pay inheritance tax.

Others who would already have paid some tax will have to give a larger chunk of their estate to the Treasury. Individuals can pass on £325,000 in inheritance tax free, a level set in 2009. A couple can jointly pass on £650,000.

Mr Sunak agreed to freeze that threshold at £325,000 until April 2026 last spring when he was chancellor. Next week the freeze is expected to be extended to April 2028.

By keeping the threshold at a fixed point, rather than rising in line with prices, more people’s estates are dragged above the tax threshold, a phenomenon known as “fiscal drag”. A similar approach is to be widely applied by Mr Hunt, with thresholds or allowances expected to be frozen for income tax, national insurance and capital gains tax.

The Daily Telegraph revealed on Saturday that the pension lifetime allowance will also be frozen for a further two years, exposing people to higher tax payments on their lifetime savings. It is also expected that pensions and benefits will rise in line with inflation. Mr Hunt and Mr Sunak held talks on Saturday about the announcements, with their decisions now submitted to the Office of Budget Responsibility.

By freezing inheritance tax thresholds for another two years, the Treasury could rake in as much as £1billion extra, according to wealth manager Quilter. But if the inflation rate falls it would lead to a lower saving for the Treasury.