Reviewing changes to the tax on inheritance to cover the deficit

• The Treasury is reviewing changes to the tax on inheritance.
• The proposed limitation on non-taxable gifts could be one of the options.
• The pressure on the finances of the country is increasing due to economic difficulties.

The Treasury of Great Britain is exploring the possibility of increasing revenues from the inheritance tax in connection with the pressure on the finances of the country before the upcoming budget. Gerald reports that officials are considering a proposal to tighten rules regarding the transfer of money and property to solve the problem related to the budget deficit, which, according to estimates, exceeds 40 billion pounds sterling.

Although decisions have not yet been made, the government does not rule out the possibility of raising taxes due to the expected economic recovery, high inflation, and high unemployment.

Among the possible changes, the review includes a proposed limitation on the amount that can be gifted tax-free during one’s lifetime without paying inheritance tax. Currently, gifts made seven years before death are not subject to taxation, while those made within three years are taxed at a reduced rate.

Gerald indicates that the Treasury is also considering options to change rules regarding the reduction of inheritance tax, as a significant portion of wealth is held in assets, such as property, which has significantly increased in value. Discussions are underway regarding the potential introduction of a capital gains tax.

According to recent data, only 4.6% of inheritances were taxed in the 2022-2023 fiscal years, while the average effective tax rate was 13% after accounting for all reductions and exemptions.

Labour has already expressed the idea of a tax on wealth, but changes to the inheritance tax could provoke a similar super-wealthy reaction. The government aims to find a balance between increasing revenues and protecting domestic capital from the country.

Tags: Europe/Politics/Economy