The often criticised tax is paid on the estate (such as property, money and possessions) of a deceased person. The standard Inheritance Tax rate is 40 percent, and is charged on the part of the estate which is above the threshold. This threshold is currently £325,000, however, some people may have an increased threshold. If everything above the £325,000 threshold is left to a spouse, civil partner, a charity, or a community amateur sports club, then there is normally no Inheritance Tax to pay.
In 2017-2018, the Treasury raked in £5.2billion from Inheritance Tax, and this rose to £5.4billion in 2018/19.
This 2019/20 financial year the tax take is expected to break all records with a projected £5.6billion taken from grieving families.
Last week, Chancellor Sajid Javid hinted he could scrap Inheritance Tax in the upcoming Budget, which will take place before the end of this year.
Speaking at a Conservative Party conference fringe event organised by the Institute of Economic Affairs and the Taxpayers’ Alliance, he was asked if he would scrap Inheritance Tax.
What do you think should happen to Inheritance Tax?
Mr Javid replied “sensible reforms” had already been made, adding: “I shouldn’t say too much now but I understand the arguments against that tax.
“You pay taxes already through work or through investments and your capital gains in other taxes, there is a real issue with then asking them, on that income, to pay taxes all over again.
“Sensible changes have already been made but it’s something that’s on my mind.”
In June, the Labour Party unveiled proposals to reform Inheritance Tax, replacing it with something described as a “lifetime gifts tax”.
Sajid Javid hinted he could scrap Inheritance Tax in the upcoming Budget
Under Labour’s new plan, everything a recipient receives above the value of £125,000 would be taxed annually at income tax rates.
The threshold would be set for each child, so two children could inherit an estate worth £250,000 tax-free. Anything above the threshold would be taxed annually at income tax rates.
Shadow Chancellor John McDonnell told Sky News at the time: “We are looking at it and it might be one of those ideas, and we’re consulting on it at the moment.
“I think it’s interesting. We need to have a fairer system of how we can ensure that wealth is more fairly distributed, that’s one idea and we are listening to a whole range of ideas.”
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But Brandon Lewis, chairman of the Conservative Party and former Housing Minister under David Cameron, said: “This shows the truly shocking extent of Corbyn’s tax raid on homes.
“Over 10 million would be caught by Labour’s new tax grab, hammering families across the country.
“Only the Conservatives believe in lowering taxes and helping people achieve homeownership.”
Earlier this week, Housing Secretary Robert Jenrick became the latest Cabinet Minister to back a cut to inheritance Tax, describing it as “unfair” and meant people were “paying tax twice”.
Robert Jenrick described Inheritance Tax as ‘unfair’ and meant people were ‘paying tax twice’
James Roberts, political director of the TaxPayers’ Alliance, said: “Hopefully this upcoming budget will be the final nail in the coffin of the hated inheritance tax.
“Death duty remains one of the most dastardly taxes, slamming families at the worst possible time for assets their relatives have already paid tax on.
“Taxpayers will be delighted to hear the chancellor’s suggestion, which is now being echoed by other government ministers, that the budget could offer a respite from this unpopular, unfair and deeply illogical death tax.
“With an election on the horizon, abolishing inheritance tax would send a welcome signal to voters that politicians have heard their calls and will put the principle of taxing bereavement to rest.”