Extra time available for Inheritance Tax planning
In July we reported on the costs of Government measures to support the economy during the pandemic and the consequential increase in national borrowing. There were fears in the summer that tax rises were imminent and might be introduced in the Autumn Budget.
Those fears have not been realised. It was reported that this Autumn is not the time to outline long-term economic plans, but instead to focus on people's jobs. However, the spending review earlier this week gives an indication of the economic impact of the Covid-19 crisis.
It still appears very likely that tax increases will be needed in the fullness of time. Indeed it may be that new legislation is put forward without a Budget. There is an opportunity to review your personal tax position, as it gives more time for any action to be taken.
Inheritance Tax in particular should be started as early as possible. We also reported in July on the reforms to IHT proposed before the lockdown. The Office of Tax Simplification had produced a report to reform the existing IHT regime. The All-Party Parliamentary Group had proposed a more radical overhaul to create a new regime with a lower flat rate of tax but fewer reliefs, including repealing Agricultural Property Relief and Business Property Relief.
There have not been further announcements about which, if either, of these sets of recommendations are to come into effect, but it appears likely that when the current crisis starts to ease there will be changes coming, if not before.
How much IHT is paid by a particular estate can be determined by whether a person survives lifetime gifts they have made by 7 years, or planning that requires assets to qualify after 2 years (for instance, in relation to Business Property Relief). Therefore starting sooner, even in an initially small way, is often the better approach than to wait until it is too late to address the issue.