Inheritance tax: Britons urged to make gifts now as experts fear Rishi Sunak raid | Personal Finance | Finance

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Reforms to a variety of wealth taxes are on the table as Chancellor Rishi Sunak aims to raise money to pay for the coronavirus pandemic. Recent Bank of England data has put the 2020 economic slump at 10 percent, similar to the 9.7 percent decline seen in 1921. GDP (gross domestic product) plunged just after the first lockdown was introduced, falling by 25.6 percent between last January and April. The Bank of England has said that the UK’s GDP will not return to pre-pandemic levels until 2022.

This comes after the UK’s national debt surpassed £2trillion in recent months and as Government spending to deal with COVID-19 nears £300billion.

Yahoo! Finance reported last month that inheritance could be reformed to eliminate the Potentially Exempt Transfer (PET) policy, which allows individuals to make gifts of unlimited value to friends and family without being issued with duties.

The standard inheritance tax rate is 40 percent. It’s only charged on the part of your estate that’s above the threshold of £325,000.

Julia Rosenbloom, a partner and Smith and Williamson and tax adviser, has claimed that PET is likely to be abolished, and offered crucial advice to those looking to avoid unwanted bills.

Ms Rosenbloom wrote for Your Money: “This could be replaced with an immediate lifetime inheritance tax charge upon making the gift.

“If the recommendations made by the APPG (the All-Party Parliamentary Group for Inheritance and Intergenerational Fairness) in their report released in January are taken on board, that could mean a rate of 10-20 percent where a gift exceeds £30,000.

“So, if you’re thinking of making a substantial gift, it would be advisable to consider doing it sooner rather than later. Action taken in anticipation of changes does, however, involve significant risk as changes may not be introduced as expected.”

Miss Rosenbloom has also warned of the potential impact of the abolishment of PET.

READ MORE: Inheritance tax increase ‘on horizon’ as expert warns: ‘I’m fearful’

She added: “Coupled with a probable increase in the rate of Capital Gains Tax, this would represent a significant restriction on people passing on their wealth, making it much more expensive to gift to their children or grandchildren.

“We are also likely to see some changes to the current pension relief in the Budget next year.

“This could mean the limiting of tax relief or creating a tax relief hybrid, resulting in us all receiving the same relief of 30 percent, for example.

“Pensions are already very confusing, and making more changes will mean people understand it even less. We need a set of reliable and consistent pension rules to ensure people feel confident in saving for the future.

“The real danger is that these cuts will lead to a drop in the amount that people contribute to their pension pot.”

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Reports in recent weeks have suggested it is likely pensioners will feel the brunt of Mr Sunak’s new economic measures.

Paul Green, the CEO at Over50smoney, said this month: “Pensions are complex and their tax treatment has been under discussion for years.

“It looks highly likely that the Chancellor will reduce the amount of tax relief on pension contributions.”





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