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Inheritance tax: Savers warned levy is 'obvious target' for Rishi Sunak's tax raid

Chancellor of the Exchequer Rishi Sunak is looking for ways to raise money to help pay for spending during the pandemic. In March's Budget, he froze various tax thresholds including on pension lifetime allowance. However, many have feared that more tax reforms are needed in order to rebalance the economy, and inheritance tax could be the one that Mr Sunak zeros in on.

Analyst at AJ Bell, Tom Selby, tells Express.co.uk that inheritance tax is an "obvious target" for the Chancellor.

He said: "I think everything is going to be in the Chancellor's view as we move to the next Budget, inheritance tax is an obvious target for the Government to look at.

"Certainly the amount of people's estate that is subject to inheritance tax has been reduced over the last few years, it has become more generous.

"While this has been a vote winner, I think in a country which is facing severe fiscal problems and with a financial hole in excess of £300billion at the moment, allowing people to inherit more tax free might be a bit too generous.

"I suspect they will look to tighten inheritance tax, although I suspect people will try to move around their assets in a way that avoids the tax in the first place."

Mr Selby believes the Government will opt for a change of the threshold rather than an increase of the rate paid.

He added: "You can either increase the percentage charged or you can decrease the limits of inheritance tax. Historically they have gone for the threshold route and I suspect that is the option they would go for again."


Inheritance tax pulled in £190million more in the latest tax year when compared with the year before.

This was a four percent rise from the previous year, taking the total paid in inheritance bills to £5.4billion in 2020-2021.

The tax haul is expected to reach an all-time high of £6billion next year, thanks to the mounting COVID-19 deaths, booming house prices and a five year freeze in tax protections announced at the March Budget.

The standard inheritance tax rate is currently 40 percent.


However, it is only charged on the part of your estate that's above the threshold of £325,000.

There are also several ways of legitimately reducing your bill, including making use of the annual £3,000 gifting allowance, or unlimited £250 small gifts allowance to reduce the value of your overall wealth.

Parents can also give £5,000 tax-free gifts to their children on their wedding day, while grandparents can gift £2,500.

Mr Selby believes that wealth taxes are the "fairest way" for the Government to raise funds, but warns many wealthy people will have the ability to reduce their bills.


He added: "I think wealth taxes are probably the fairest way - ensuring those with the broadest shoulders are targeted to take on the costs of paying for COVID-19.

"It would be fair, whether it is something they believe they can do politically is another thing. There will be challenges around people avoiding bills."

Chief Economist at Resolution Foundation, Jack Leslie, told Express.co.uk earlier this year that the Government should reform wealth taxes in order to raise funds.

He said: "The Government should fix the system that it has, make it fairer, and close the loopholes.



"You could raise billions without touching the headline rates, fixing the current system is a better approach than trying to introduce a whole new wealth tax.

"One of the really big trends in the economy over the last 30 years is that the overall value of the wealth people hold is worth around twice what it was 30 years ago.

"But at the same time, taxes on wealth have stayed completely flat, so we are essentially taxing wealth half as much as we used to.

"That doesn't seem to make much sense given we might need to find more money after this crisis, and wealthy people can probably afford to pay more.

"It makes sense that the people who are less likely to have lost their jobs and face health risks, it does make sense that wealthy people should pay more in the future."

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