The economic devastation created by coronavirus could have a profound effect on all our financial plans. It is almost inevitable that taxes will rise as the Government attempts to fund its unprecedented state spending and make up for lost revenue in taxation.
Potentially, this could mean the biggest shake up of the UK’s tax system since the aftermath of the Second World War, and there is speculation from experts that one of the key measures will be a significant hike in Inheritance Tax (IHT) to help finance higher government spending. Tax income from March 2020 is down £2.2Bn and could fall further as profit margins and jobs take a significant hit, all while government spending is on course to exceed £1trillion this year!
Experts at Whitley Stimpson one of the largest independent accountancy and business advisers in the area, are urging people to start evaluating their personal taxation plans now, particularly over IHT, so as to remain agile and efficient when changes do manifest themselves.
After the enormous expenditure of WWII, Britain was faced with funding a huge public debt. Inevitably, that meant increasing duties, and without over-burdening the lower paid members of society the government had no choice but to have wealthier people being taxed like never before.
Inheritance tax was raised to 80pc after the war and even 85pc in 1969, along with punitive rates of tax for high earners – there is the potential for this to happen again. Inheritance Tax is paid out of the deceased person’s estate to HMRC and overseen by the executor of a will.
Val Buzzard, Director at Whitley Stimpson’s Banbury Office, said: “With unprecedented emergency measures already having been announced, planning for the future in terms of personal finances is even more important than usual. IHT can be a very complicated area of taxation due to extensive rules and underlying issues, often dependent on families’ individual circumstances. Planning for the future is essential: sometimes, for example, it is better for parents to downsize and arrange for cash to be passed on to their children – although this requires careful consideration.”
While IHT may not reach the stratospheric levels of post-war Britain, rumours had already been circling for some time that reform of the system was on the way. Now, certain current reliefs, such as being able to pass on unused pension assets tax-free and the “seven-year rule”, which exempts gifts survived by the donor for seven years or more, may well be abolished to raise extra money for HMRC.
“Now is the ideal time to spring clean your finances,” continues Val, “to avoid paying unnecessary inheritance tax in the future. We carry out substantial planning to ensure that the tax our clients pay is minimised. It is crucial at this time – more than ever – to seek the right advice to avoid any pitfalls and to make the most of any new opportunities. I would encourage people to talk to one of our tax specialists to work out the best way forward for their individual circumstances.”
For further information, contact Val Buzzard on 01295 270200 or email: Valb@whitleystimpson.co.uk