A fall in the revenues achieve through Capital Gains Tax, from nearly £17 billion in 2022-23 to £14.5 billion in 2023-24, and £13.1 billion in 2024-25, is evidence the wealthy will simply change their behaviour amid speculation of a ‘wealth tax’ says Shaun Moore, tax and financial planning professional at Quilter.
‘The government’s decision to slash CGT allowances and hike rates has backfired’ said Moore in the wake of the publication of the latest HMRC tax receipts data. The result of which could be people will simply change their behaviour or adjust their financial plans to mitigate the tax bills.
“While taxing the wealthiest may sound politically appealing, the CGT experience shows that people will change behaviour… (and) could accelerate the exodus triggered by the abolition of non-dom status – undermining the very revenue it aims to raise.”
The warning comes as June’s inheritance tax figures for this financial year so far £2.2 billion, which is £0.1 billion higher than the same period last year; which Ian Dyall, head of estate planning at wealth management firm Evelyn Partners reminds us, was a record year for IHT receipts.
“Even with the relative softness in the property market suggested by recent house price indices, the trend for more families and more assets attracting IHT liabilities is set to continue as nil rate bands remain frozen. Property prices and equity valuation remain at or near all-time highs, and once business and agricultural property reliefs are watered down from next April, and then unspent pension funds become subject to IHT calculations from April 2027, there’s likely to be big jumps in IHT liabilities across the UK, and not just in the South East where they are traditionally concentrated.”
“Households however can take action, whether that is using annual gifting allowances, drawing down on their pensions to spend or gift some funds, or setting the clock ticking on larger lump-sum gifts. Many people might need to look at their will and death benefit nominations afresh to accommodate the new IHT rules on the horizon, while others still might think it worth insuring their beneficiaries against a growing IHT burden by writing whole of life insurance policies into trust,”
adds Dyall, referring to an uptick in enquiries about life insurance policies for IHT reported in The Times over the weekend.
Tim Snaith, Partner at Winckworth Sherwood, concludes
“IHT revenues continue to steadily rise due to the prolonged freeze on IHT thresholds. The nil-rate band (NRB) and the residence nil-rate band (RNRB) have not been adjusted for inflation or rising property values, which means more estates are becoming liable for the tax as asset values increase. It remains a persistent and unavoidable inheritance tax planning issue, and one that should not be ignored. To avoid unexpected financial burdens, it is crucial for individuals to regularly review their wills and estate planning, with professional legal advice, to manage their wealth efficiently.”
