The UK is in the midst of an economic crisis as a result of the coronavirus pandemic, putting the country in a double dip recession. The concerning state of the economy was once again highlighted recently as the national debt jumped to more than £2 trillion. The budget deficit – the annual shortfall between spending and tax income – is expected to reach more than £400 billion this year. This has led many to question how Chancellor Rishi Sunak will look to revive the economy, with many fearing imminent tax hikes. Mr Sunak has not yet revealed what tax policies he intends to change. A recent report published by the Office of Tax Simplification, commissioned by Mr Sunak, suggested rises in capital gains tax which could impact inheritance duties. But, as experts have highlighted, the number of families charged inheritance tax on gifts has climbed for three years in a row, and many are falling foul of the complex rules. Last week, the Office for Budget Responsibility projected that the number of estates subject to the duties will rise after the pandemic from 25,200 in 2019/20 to 30,400 in 2020/2021. Following a Freedom of Information request, HM Revenue & Customs this week revealed an increase in estates liable for IHT on gifts — up from 873 estates in 2015/16, to 920 in 2016/17 and 993 in 2017/18. The tax charged on gifts rose from £135m in 2015/16, to £156m in 2016/17 and £197m in 2017/18, the latest year for which data is available. Altogether, £5.2bn was raised in 2017/18 from 24,200 estates. Many families of older UK people who died from coronavirus could now face unexpected inheritance tax bills on their estates. Many of those who died unexpectedly will not have had time to plan their affairs. There are also the pitfalls of misunderstanding the rules. Many individuals who make gifts during their lifetime are unaware of the various available allowances and exemptions, let alone that their gifts could end up coming back to bite their beneficiaries in the form of a hefty tax bill. Mr Sunak has faced opposition from many within his own party over potential tax hike plans, many citing the plight faced by many self-employed workers who have been excluded from financial support during the Covid Crisis.

“Past performance is not a reliable guide to the future. The value of investments and the income from them can go down as well as up. The value of tax reliefs depend upon individual circumstances and tax rules may change. The FCA does not regulate tax advice. This newsletter is provided strictly for general consideration only and is based on our understanding of law and HM Revenue & Customs practice as of December 2020 and the contents of the Finance Bill. No action must be taken or refrained from based on its contents alone. Accordingly, no responsibility can be assumed for any loss occasioned in connection with the content hereof and any such action or inaction. Professional advice is necessary for every case.”