Finance leaders have come out saying that scrapping inheritance tax could be a bad decision for the economy.
Prime Minister Rishi Sunak has reportedly been discussing plans to abolish inheritance tax – the tax that heirs may have to pay when inheriting a person’s money, property and possessions when they die.
It is generally only paid if the estate is worth more than £325,000 (based on a single person for the current tax year, 2023/24), depends what general covers – what about RNRB. After that the remaining value of the estate is taxed at 40% (or 36% if a certain proportion is left to registered charity).
Currently around £7.2bn is raised each year through inheritance tax, with a lot of it being spent on public services.
Hampshire-based business owners believe that scrapping the tax could be an ‘irresponsible’ idea.
Colin Bielckus is a business advisor and runs The Outsourced Finance Director. He believes that scrapping inheritance tax is a ‘foolish’ decision, particularly in the current economic climate.
He said: ‘It seems absolutely foolish and irresponsible of the Government to suggest scrapping any kind of tax during the climate that we’re currently in. We’ve very narrowly avoided a recession but we’re not out of the woods yet. However, I don’t believe this is something that will go ahead – it’s likely just to get votes.’
There are steps that people can take to avoid their heirs paying inheritance tax, such as gifting money or assets, buying certain insurance policies, or investing in certain schemes.
Financial advisor Ian Batterbee runs wealth management firm, Sterling and Law Hampshire and works with clients to help them to take steps to reduce the amount of inheritance tax their heirs will pay.
He said: ‘Inheritance is a voluntary levy and there are ways to avoid paying it that are completely legal and above board. However, it does mean giving up some control and most people aren’t willing to give up control of their assets.
‘The wealthiest people will benefit the most if inheritance tax is abolished because, if they haven’t planned beforehand, they’ll be paying the most tax on their inheritance. Lower earners who are inheriting an estate that surpasses the threshold will also benefit however, but even if the tax isn’t scrapped, they can still avoid paying it. It just takes careful planning with the person from whom they’re inheriting the assets. That’s why people like myself do what we do – to help people get the most out of the money that they inherit.’