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Chancellor Rishi Sunak announced a host of new economic policies this week during his spending review. People across the country have been concerned as to how the pandemic will impact their wealth. Mr Sunak refused to rule out tax hikes, and Government figures published, alongside the spending review outline, how it could be set to recover more cash from taxpayers. This is because, amid the coronavirus pandemic, the number of people paying inheritance tax will rise by a fifth according to estimates.
This will see the Government earn £5.2billion in this tax year, up from £5.1billion last year.
The Government predicts that, this year, 722,000 people will have died by the end of 2020-21, up from 612,000 projected deaths for 2019-20.
Becky O’Connor of Interactive Investor explained that families of those who have passed away as a result of the COVID-19 crisis will be hit with a “double whammy” of tax bills.
She said: “The families of older people who died from coronavirus could now face unexpected tax bills on their estates. Many of those who died unexpectedly will not have had time to plan their affairs.
“It’s sadly not unheard of for loved ones to die before they’ve put their finances in order – it is often the case that people don’t attend to this until their health starts to deteriorate.”
Her comments were made to the Telegraph, and Lesley Davis, partner in the private client team at law firm Shakespeare Martineau, advised people earlier this month on how to avoid any potential hikes in inheritance tax.
She said: “Anyone who owns their own home and has a level of savings could well find themselves impacted, making them less able to pass on their assets to their children in future.
“To mitigate these impacts, lifetime gifts made now either directly or into a trust could offer some protection. People should also ensure they have properly structured wills that provide the flexibility to move with changes in tax legislation.”
Inheritance tax rates currently sit at 40 percent.
Julia Rosenbloom, a Tax Partner at Smith & Williamson LLP, said this week that Mr Sunak had “kicked the can” down the road in his spending review which barely addressed tax policy.
She also predicted that tax hikes are around the corner.
Ms Rosenbloom added: “While today isn’t the right time for tax rises, they are likely to be on the horizon for 2021 so individuals and businesses should reflect on their tax planning now before any changes are made.”
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Tax Research UK’s Richard Murphy said last year that IHT should be scrapped for a fairer system.
He said: “Because it collects relatively little money there are a great many options for replacing IHT.
“The most effective, and fairest, would be to tax all receipts of gifts during a person’s lifetime.
“This would discourage the concentration of wealth and instead of charging the dying – who could then give to whomsoever they wanted – would charge the living to reduce inequality. Few doubt that this is the best long term direction of travel.”
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