The autumn statement has not brought about any changes to inheritance tax despite widespread anticipation it might.
Seen very much as a potential vote winner at next year’s election, it has been suggested that any changes, which may favour the wealthier in society, could be introduced in the Spring.
IHT receipts also went up again this week – revealing that £4.6 billion was collected through the first seven months of the 2023/24 Financial Year – a 12% increase on the same period in the previous year (£4.1 billion through the first seven months) with the tax likely to raise yet another record annual total for the Chancellor of the Exchequer.
The uncertainty has seen some practitioners take to social media to say that the uncertainty has put clients off making long term decisions on their estate planning.
Hunt revealed that the state pension will increase by 8.5% from April 2024 to £221.20 a week, as the government honours the triple lock “in full”. He also announced that he will consult on giving people one pension pot for life. The BBC reported that he will consult on giving pension savers a “legal right to require a new employer to pay pension contributions into their existing pension”.
The government announced a comprehensive package of pension reform that will provide better outcomes for savers, drive a more consolidated pensions market and enable pension funds to invest in a diverse portfolio. These measures represent the next steps of the Chancellor’s Mansion House reforms and meet the 3 golden rules:
- to secure the best possible outcomes for pension savers
- to prioritise a strong and diversified gilt market
- to strengthen the UK’s competitive position as a leading financial centre
The package sits alongside the government’s comprehensive capital market reforms, to boost the attractiveness of markets, and make the UK the best place to start, grow and list a company. Despite the discussion around pension reform, there was still no mention of inheritance tax cuts. Caroline Miller, Partner & Head of Private Client at Wedlake Bell, commented:
“Given its reputation as one of the most hated taxes in Britain, many will be surprised that Jeremy Hunt has declined to cut or abolish inheritance tax, a widely expected announcement that would not only have been popular with voters but would not cost the Exchequer too dearly (some £6 billion).
It is possible that any inheritance tax cuts or reforms will instead be saved for the 2024 Spring Budget to make them more impactful in the run-up to the General Election, in which case, unless introduced immediately (which would be unusual but not unheard of), taxpayers are unlikely to benefit until there is time to implement the policies after the Election.
If the Labour party win, they have made it clear they are not in favour of any sort of inheritance tax cut, so whether or not there will in, in reality, be any abolition or significant concessions in respect of inheritance tax remains very much up in the air.”
Emily Deane TEP, Head of Government Relations at STEP, said that it is “disappointing” that the government has not announced a review of the inheritance tax regime which “creates huge complexity for families”. She continued:
“We urge the government to review it at the next possible opportunity, with the view to making it simpler, fairer and more effective.
Work by the APPG for Inheritance and Intergenerational Fairness, which STEP contributed to, shows there are radical yet practical steps the government could take to achieve this aim while ensuring the exchequer doesn’t suffer a significant shortfall. Reform could be as simple as reducing the current 40% fixed rate, removing some of the reliefs, and abolishing potentially exempt transfers. A lower fixed rate alone would simplify the whole system thereby decreasing opportunities for avoidance and abuse.
‘The current system is antiquated and complex and we will continue to work with parliamentarians and the government to improve it.”