Sunak fails to scrap UK's 'most unfair tax' as Britons risk charge of 40% on inheritance
IHT was absent on the agenda during Sunak's manifesto launch
GETTY/PA
The most "unfair tax in Britain" will remain in place if the Conservative Party remains in power, based on today's manifesto announcement from Rishi Sunak.
Inheritance tax (IHT) will not be scrapped if the Conservative Party wins the General Election as mention of the levy was suspiciously absent from the party leader's speech.
A survey conducted by YouGov last year found that IHT was considered the most "unfair tax" in Britain compared to other charges such as income tax, National Insurance and VAT.
Despite this, Sunak failed to confirm any cuts to inheritance tax, or the abolishment of the levy, in a blow to Britons who are forced to pay the charge to HM Revenue and Customs (HMRC).
This comes as the Labour Party have indicated reform to IHT allowances and exemptions are on the cards if Sir Keir Starmer wins the keys to Number 10 Downing Street.
Prior to today's manifesto announcement, former Tory Chancellor George Osbourne referred to the abolishment of inheritance tax as potentially Rishi Sunak's "last throw of the dice" to convince voters.
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Britons are being slapped with a 40 per cent on the estates of their loved ones
GETTYGary Smith, a partner in Financial Planning at Evelyn Partners, outlined what could potentially happen to IHT, in lieu of the tax being scrapped by the major political parties.
He explained: "Labour have made it clear they think some inheritancetax exemptions and allowances are too generous, so it’s possible some sort of measures will be taken to reduce them if they gain power.
"While the IHT-exempt status of defined contribution (or money purchase) pension pots has not been mentioned by Labour, it has been highlighted more than once by think-tanks as an anomaly, so it might well be on Rachel Reeves’ radar.
"If some steps were taken to levy IHT on the transfer of pension assets, this would probably lead to a widespread draining of drawdown pots, and a lurch towards other assets and tactics that mitigate against IHT, which at 40 per cent is quite significant."
What is inheritance tax?
This is the tax which is imposed on the estates of people, including their money, possessions and property, once they passed away.
It is charged at 40 per cent on estates which are priced above the current £325,000 threshold.
Based on the most up-to-date figures from HMRC, only 27,000 estate paid inheritance tax during the 2020-21 tax year.
However, the tax authority brought in £5.76billion in IHT liabilities during this time.
How to legally avoid paying inheritance tax?
There are multiple ways people can reduce their inheritance tax liability without falling foul of HMRC rules.
These include:
- Placing your life insurance policy in a trust
- Gifting money to friends and family before your death
- Taking advantage of trusts
- Making charitable donations.
LATEST DEVELOPMENTS:
The latest figures show less than four per cent of estates paid inheritance tax in 2020/2GETTYDuring his manifesto announcement, Sunak outlined another cut to National Insurance and promised to abolish the levy on working-age people who are self-employed by the end of the next Parliament.
He also promised the Tories would not raise income tax or VAT if they are voted back into Government by the public.
Labour have made similar pledges on income tax and VAT, however Sir Keir's party has not signaled whether cuts to inheritance tax or National Insurance are on the cards.
Earlier this week, the Reform Party promised to raise the threshold at which households pay inheritance tax.
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