The growing budget deficit is concentrating minds on radical reforms to inheritance tax, which now appear more attractive in the current climate, say Judith Millar and Alastair Collett of BDB Pitmans
The Office for Budget Responsibility (OBR) recently estimated that Covid-19 could cost the UK £298bn for the 2020/21 financial year. As the country emerges from lockdown, the stark reality of this staggering figure is capturing the headlines.
But the big question - how are we going to pay for it all? – remains to be answered.
Aside from increasing borrowing and considering spending cuts, raising taxes will no doubt be high on the government’s agenda and concerns have been expressed that changes to inheritance tax (IHT) or some form of wealth tax may be in the pipeline.
The more obvious focus, albeit contrary to the Conservative manifesto, would be income tax, VAT and national insurance contributions which the OBR was expecting to raise £475bn in 2019/20, representing 58.6% of all receipts. By contrast, the forecast for IHT was £5.3bn, representing a paltry 0.7% of the total. Interestingly the manifesto was silent on IHT.
